A night of poor data pushed investment markets back toward safety. European and US shares tumbled as investors sought the safety of leading nation’s bonds. The hard evidence of economic damage overcame positive sentiment around declining Covid-19 infection rates. The US dollar reversed recent weakness and commodity currencies lost ground against the Japanese yen. Cryptocurrencies declined.

Weak French and Italian CPIs and China investment data started a rout of German, French, UK and Spanish stocks. Major indices tumbled 3% to 4%. The negativity bled into US trading, spurred by a worse than expected 8.7% fall in US retail sales. The US SPX 500 shed 2.2%. Financial stocks sunk after earnings misses from Goldman Sachs, Citigroup, US Bancorp and Bank of America. Only Energy and Material stocks fared worse, but all three sectors dropped more than 4% - a poor lead for the Australia 200 index with its heavier weighting to these industries.

A divergence in bond markets illustrated declining sentiment. Ten-year bonds issued by leading nations rallied, but next tier nations such as Italy, Greece, Brazil and Mexico fell, despite their higher yields. This points to capital preservation, rather than returns, as the rationale behind overnight trading. Gold maintained levels above US $1,700.

Crude oil markets proved were the exception. The US Department of Energy reported an historic 19.2 million barrel build in inventories over the last week, West Texas Intermediate defied the supply surge and slipping sentiment to snap back above $20 a barrel after touching a nineteen year low intra-session.

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