Tom Westbrook

SYDNEY, (Reuters) – Asian stocks started the week softly on Monday. Oil and the euro fell as a result of the European COVID-19 restriction return and talk of accelerated tapering by the U.S. Federal Reserve. Investors were alert.

Oversupply worries caused oil futures to drop by 1% after the opening. They fell to $78.05 and $74.76, respectively, for a seven-week low. [O/R]

Bank stock losses led to a 0.4% drop in shares of Australian companies. The index that measures Asia-Pacific share prices was the broadest MSCI Index was also down 0.3%. It was then flat. [.AX][.T]

Rodrigo Catril from National Australia Bank (OTC) Sydney said, “There are doubt marks over Europe’s resilience, and the European economic, exacerbated by the protests and infected rates seen over weekend.”

His comments were further reinforced by the recent strength of U.S. data as well as recent hawkish remarks made Fed officials.

Close to its 16-month lowest, the euro fell 0.2% to $1.1280. Recent sessions have seen the common currency dominate markets as investors bet on Europe’s economic recovery being slower than the U.S.

Recent market volatility has also been a boon for safe assets such as gold, bonds and the yen.

Monday’s benchmark 10-year U.S. Treasuries yield was stable at 1.5634%. The support level for gold was $1,845/ounce. At 114.09 dollars, the yen was steady.

Also, the risk-sensitive Australian currency fell seven weeks to $0.7227. South Korean stock prices were not as strong as those in the U.S., where chipmakers moved higher on a positive outlook for memory-chip demand. [FRX/][.KS]

After Friday’s slide in Wall Street indexes, the stock rose 0.2% [.N]

HAVEN PLAYS

Although trade is expected to thin this week in America due to Thanksgiving, traders should continue monitoring COVID-19 in Europe and central bank speakers particularly in Britain.

Austria entered its fourth lockdown, along with Germany neighboring it. This came as protests against restrictive measures took place throughout the continent.

Expect a decline in sentiment and output in surveys from Europe and Britain over the coming week.

Jane Foley, Rabobank’s Head of FX Strategy said that the combination of growth, COVID and geopolitical concern in the euro area is favorable for safe-haven investments.

She said that the recent dip below $1.15 and subsequent slide downwards have forced us to reduce our forecasts of the currency pair,” adding that it would be around $1.12 by the middle next year.

Meanwhile the U.S. economy has been surprising analysts with stronger-than-expected retail sales data and hot inflation in recent weeks. This week’s focus is on the prices and labour market, and what the Fed may do to improve their strength.

Richard Clarida, Fed Vice Chair, stated last week that it might be worthwhile to discuss speeding up tapering at the December meeting. The Fed Minutes are due Wednesday.

China, expectedly, remained at its benchmark lending rate for household and corporate loans on Monday for the 19th month.

New Zealand’s central banks are expected to increase rates in South Korea this week. Swap markets have been priced at about 40% for a possible 50-basis point rate rise in New Zealand.

After posting its worst two-months in a row last week, the company was feeling pressure. The last time it reached $58,180.