GLOBAL MARKETS-European shares sink to one-month lows as COVID-19 cases surge

* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Reuters Live Markets blog: LIVE/

By Elizabeth Howcroft
LONDON, Oct 27 (Reuters) - European equities fell in early
Tuesday trading as risk-aversion swept markets, with a
resurgence of coronavirus cases threatening the global economic
recovery and caution ahead of U.S. elections on Nov. 3.
Wall Street had its worst day in a month on Monday, and
Asian markets also fell overnight. The MSCI world equity index, which tracks shares in 49
countries, was down 0.1% at 0828 GMT, having erased some losses
overnight after dropping to a 19-day low in the previous session
.MIWD00000PUS .
MSCI's main European Index was at a one-month low, down 0.5%
.MSER .
The STOXX 600 also touched new one-month lows in early
London trading, down 0.4% on the day .STOXX , as weakness in
miners and automakers offset upbeat results from UK blue-chip
companies HSBC and BP. "It's difficult to escape the feeling that investors are
undergoing much higher levels of apprehension about how events
over the next few days, as well as the next few weeks, are
likely to play out, with respect to the prospect of tighter
restrictions and new lockdowns," Michael Hewson, chief market
analyst at CMC Markets UK, wrote in a note to clients.
The United States has seen record COVID-19 infections, while
in France authorities are looking at options for tighter
lockdown measures as the virus has kept spreading despite some
of the tightest restrictions in Europe. In Italy, there were protests against lockdown restrictions
on Monday, with violence reported in Milan and Turin.
A lack of progress towards U.S. fiscal stimulus also
dampened sentiment.
U.S. House of Representatives Speaker Nancy Pelosi is
"optimistic" a COVID-19 relief deal can be reached before the
elections, her spokesman said on Monday, while White House
economic adviser Larry Kudlow said talks had slowed, but were
continuing. UBS wrote in a note to clients that, regardless of who wins
the U.S. elections, a fiscal stimulus bill would pass soon
after.
"Although we expect a fiscal stimulus to pass regardless of
the electoral outcome, a "Blue Wave" would likely make its size
bigger and passage faster," UBS said, referring to the
possibility of a big victory for Democrat Joe BIden.
But CMC Markets' Hewson said any fiscal stimulus plan would
not be able to come in until after a potential Biden
inauguration, which would be in January 2021.
With one week until the U.S. elections, Wall Street's "fear
gauge", the Cboe Volatility Index, hit its highest closing level
since Sept. 3 .VIX . Currency markets did not show risk-aversion to the same
extent as equities, with the dollar holding firm against a
basket of currencies at 93.036 =USD at 0845 GMT. The riskier Australian and New Zealand dollar saw small
gains AUD=D3 NZD=D3 .
The euro was flat against the dollar and euro-sterling was
also steady EUR=EBS EURGBP=D3 .
Brexit talks in London have been extended until Wednesday.
Prime Minister Boris Johnson said Britain's decision on whether
to agree a Brexit deal with the European Union was "entirely
separate" from the U.S. election result. Euro zone government bond yields were broadly steady, with
little appetite for major moves before Thursday's European
Central Bank meeting. The benchmark 10-year German Bund was at
-0.578% DE10YT=RR . Oil prices rose after recent sharp losses, but sentiment was
still muted, with Brent crude LCOc1 up 48 cents, or 1.19%, at
$40.94 a barrel at 0900 GMT. U.S. oil CLc1 gained 39 cents, or
1.01%, to $38.95 a barrel. On the vaccine front, hopes rose after AstraZeneca said on
Monday its shot developed with the University of Oxford produced
an immune response in both young and old adults. But sentiment was dampened by a UK study, which found that
antibodies against the new coronavirus declined rapidly in the
British population during summer, suggesting protection after
infection may not be long-lasting. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
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