Results from the latest trading session point to investors moving away from U.S. stock futures towards the safety of government bonds as jitters mounted about the recovery from Covid-19 lockdowns.
Stock futures linked to the S&P 500 were down 0.4%. European stocks traded slightly higher, with the Stoxx Europe 600 index up 0.3%. Asian markets were mostly lower as China’s recent market rally lost steam.
Concerns continue to mount over the global uncertainty about the impact of the coronavirus pandemic as well as escalating issues between the U.S. and China. The economic outlook had investors seek shelter in government bonds. On Friday, the yield on the 30-year US Treasury fell to 1.256%, and the yield on the 10-year Treasury hit 0.578%, both their lowest since April.
U.S. long-term Treasury yields fell Thursday after investors showed demand for a sale of long-term government bonds, buoying trading for government debt.
“At some stage you accept the reality that Covid hasn’t gone away, that it’s going to have an impact on all economies in terms of social distancing until we have a vaccine,” said Brian O’Reilly, head of market strategy for Mediolanum International Funds.
In China an uninterrupted streak of stock market gains ended Friday, with the Shanghai Composite Index closing nearly 2% lower. It had risen 16.5% over eight straight sessions of gains, the biggest eight-day percentage gain since March 2008, according to Dow Jones Market Data.
In an attempt to avoid a repeat of the stock market bubble and bust of 2015, Chinese authorities have expressed concerns about overshooting, with a state-run financial newspaper stressing the importance of long-term investment.
Friday’s fall was seen as caused, in part, by actions by state-owned investors. Filings showed that big players such as the National Council for Social Security Fund had unloaded stocks, according to Alvin Ngan, strategist at Zhongtai International Holdings, a Hong Kong-based brokerage.
“The cooling tone from the authorities could take some of the sheen off the frenetic market, ” he said.
One of the factors supporting bond prices is the continued concern around the unabated spread of the COVID-19 pandemic across the majority of U.S. states, which has weighed on hopes for a swift return to a pre-coronavirus economy.
The S&P 500 (SPX) and Dow Jones Industrial Average (DJIA) were trading lower, even as the tech-heavy Nasdaq Composite (COMP) clung to its session gains.
Even as markets rallied, there are persistent fears that the economic recovery will take longer than expected as the pandemic continues to spread globally. This is stoking concerns that markets could turn.