US technology stocks recover after early stumble

US stocks climbed on Thursday even as European shares hit a three-month low, with investors weighing the latest data on how coronavirus is affecting different regions of the global economy.

The tech-heavy Nasdaq Composite index fell as much as 1 per cent after the opening bell on Wall Street before recovering to show a 0.7 per cent gain in the New York afternoon. The large-cap S&P 500 also reversed early losses to trade 0.6 per cent higher. Shares in Microsoft gained 2.9 per cent while Apple stock was up 1.8 per cent.

US stocks received a boost after Nancy Pelosi, the Democratic speaker of the House of Representatives, said she was “ready for negotiation” on a new coronavirus relief plan. Congressional leaders and the White House have so far failed to agree more fiscal stimulus for the US economy, and talks stalled several weeks ago.

US home sales reached an annualised rate of more than 1m in August, exceeding analyst estimates of 870,000, according to data on Thursday. But there was also a rise in the number of Americans filing for first-time jobless benefits last week.

Thursday’s choppy start followed a US sell-off on Wednesday, in which the Nasdaq shed 3 per cent. The index had soared 65 per cent from April to its high in August before a sell-off.

The S&P 500, meanwhile, has fallen 9 per cent from its August peak, reducing the index’s gains for 2020 to just 1 per cent.

It had been “surprising” how much equities had rallied “against the backdrop of the virus”, said Johanna Kyrklund, chief investment officer at the fund manager Schroders. “The easy part of the recovery has happened now. It’s all about what happens from here.”

In Europe, the region-wide Stoxx 600 index fell 1 per cent to close at its lowest point in three months. The FTSE 100 dropped 1.3 per cent and has fallen 2.4 per cent this month, on track for its worst monthly showing since May.

There was no one factor driving that sell-off, said Alessia Berardi, investment strategist at the fund manager Amundi, but rather a confluence of negative events over the past few days.

Activity in Europe’s services sector declined unexpectedly in September, a closely watched survey released on Wednesday showed, while England and Scotland announced new lockdown rules.

Line chart of Stoxx 600 showing European markets pull back to three-month lows

The dollar, which is viewed as a haven from market volatility and also rises when institutional investors bank profits from share sales in the world’s reserve currency, held on to a two-month high against trading partner currencies on Thursday.

The index tracking the dollar’s moves against rivals has gained 2.4 per cent this month, leaving it on track for the sharpest monthly increase since July last year.

The price of gold climbed less than 1 per cent to trade just above the two-month low struck on Wednesday at $1,868 a troy ounce, having reached a record high of more than $2,000 in August.

The dollar’s rebound, Ms Kyrklund explained, was less a vote of confidence on prospects for the US economy and more a case of investors choosing to hold the currency because, unlike in the eurozone, America has not implemented negative interest rates.

“Choosing currencies is like judging an ugly competition,” she said. “Which do you find the least objectionable?”

Additional reporting by Henry Sanderson

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