Stock Markets Paused Their Rally on Wednesday. Why’s That?

Global stocks experienced their best monthly rally in three decades recently. However, the stock market was subdued on Wednesday as investors asked for more provisions from European banks. Meanwhile, U.S. shares fluctuated while waiting for key economic data.

Dow Jones Industrial Average and futures on the S&P 500 Index struggled after the gauges closed at record highs on Tuesday. U.S. economic data, from consumer confidence to jobless claims, were due before markets close and investors head off for the Thanksgiving holiday, causing more caution on the markets. A gauge of Asia-Pacific shares lost 1.1% gain from earlier sessions.

The Stoxx Europe 600 Index also tumbled down, as cyclical such as energy and mining firms fell, offsetting advances in safe-havens including utility shares. Commerzbank AG and ABN Amro Bank NV plummeted down by more than 4%, leading euro-area lenders lower. The European Central Bank announced that the industry would likely have to set aside more money to soak up losses when the government ends support towards Covid-19, triggering a downfall.

Overall, futures on the S&P 500 Index lowered by 0.1% on Wednesday, while the Stoxx Europe 600 Index dropped down by 0.3%. Meanwhile, the MSCI Asia Pacific Index declined by 0.1%, and the MSCI Emerging Market Index lowered by 0.5%.

Markets struggle as opposite sentiments clash

However, the formal start of President-elect Joe Biden’s transition to power and the selection of Janet Yellen as Treasury secretary, along with positive vaccine news has fueled optimism about the outlook for risk assets.

Despite that, restrictions to fight surging Covid-19 cases threaten to slow the global economic recovery. An MSCI gauge of global shares paused on Wednesday after skyrocketing by 13% in November, but it is still set for the best month since 1988.

On Wednesday, traders are looking out for minutes of the most recent Federal Open Market Committee meeting along with the U.S. economic data.

Ilya Spivak, the head Asia-Pacific strategist at DailyFX, stated that there’s big event risk up ahead, specifically FOMC minutes. According to him, traders are concerned that the Fed will continue to signal that they’re keeping a hands-off approach. While that means no tightening, it’s no new easing either.

Meanwhile, oil traded at approximately $45 a barrel in New York. Copper rallied to its highest level since 2014. Bitcoin surged above $19,000.

U.S. jobless claims, GDP, and personal spending data are due later on Wednesday. Furthermore, the U.K. Chancellor of the Exchequer plans to lay out a spending plan today as well.