Investors appeared willing to look beyond some of the biggest civil disturbances in the US in decades, with stocks on Wall Street little changed on Monday morning.
The S&P 500, Wall Street’s benchmark index, fell less than 0.1 per cent in the opening 15 minutes of trading. The tech-heavy Nasdaq index reversed earlier modest losses to gain 0.1 per cent.
The muted reaction from investors followed a wave of violent protests in the US after the killing last week of George Floyd, an unarmed black man, by a white police officer.
Several US cities enforced curfews on Sunday evening, and some deployed National Guard troops as protests stretched into their sixth day. The scale of the disturbances has prompted comparisons with civil rights-era demonstrations in the 1960s.
Yet several indicators of market stress were calm on Monday.
The Cboe volatility index, known as Wall Street’s “fear gauge”, rose about 2 points to just under 30, but was still trading at some of its lowest levels since February.
The US government bond market was also stable. The yield on the 10-year US Treasury rose 0.03 percentage points to 0.6770 per cent, as traders moved out of the safety of government debt.
“The market, it seems, is determined, if not entirely hell bent, on looking through the myriad negative headwinds faced by the global economy at present,” said Richard McGuire, a rates strategist at Rabobank in London.
The demonstrations in the US could lead to a surge in coronavirus infections, Mr McGuire added, and would contribute to the uncertainty facing businesses in some states. “Many businesses that had been attempting to reopen safely — with appropriate social distancing measures in place — have now either been damaged or forced to close their doors yet again in order to protect their businesses and staff,” he said.
The impact of the protests began to ripple through corporate America on Monday. Dozens of senior executives have expressed solidarity, in an unusually vocal response.
Nasdaq has postponed reopening its trading floor in Philadelphia, which was due on Monday, because of the disturbances.
Shares in Target slipped 2.1 per cent after the retail powerhouse said it would close some stores temporarily, while rival Walmart dipped just under 1 per cent.
The crisis comes as tensions between the US and China rise and states grapple with easing lockdowns without triggering another wave of Covid-19 infections.
Over the past couple of months, the S&P 500 has rallied to within 10 per cent of its all-time highs, driven by huge stimulus packages from the Federal Reserve and US government and tentative signs of an economic recovery.
The surge higher has caught out many investors, who have struggled to reconcile market exuberance with the economic damage of Covid-19.
Mohamed El-Erian, Allianz’s chief economic adviser, said the subdued market reaction to the protests was “consistent with the very sharp disconnect between markets and the economy”.
European and Asian shares rose on Monday, in gains analysts attributed to easing Sino-US tensions. But some are expecting a bumpy ride ahead.
“Whether risk sentiment can really remain this positive all week is doubtful,” said Kit Juckes, a strategist at Société Générale, who flagged the US unrest as a likely headwind.