Oil and euro slip, markets on edge over COVID-19 curbs in Europe By

By Tom Westbrook

SYDNEY (Reuters) – Asian stocks made a soft start to the week on Monday while oil and the euro were under pressure, as the return of COVID-19 restrictions in Europe and talk about hastened tapering from the U.S. Federal Reserve put investors on guard.

Oil futures skidded about 1% at the open, sending and to seven-week lows of $78.05 and $74.76 respectively amid oversupply concerns. [O/R]

Australian shares fell 0.4%, led by bank stock losses. was down 0.3% and MSCI’s broadest index of Asia-Pacific shares was flat. [.AX][.T]

“There are question marks over the resilience of Europe and the European economy, exacerbated by protests and infection rates seen over the weekend,” said Rodrigo Catril, a strategist at National Australia Bank (OTC:) in Sydney.

“It’s hard to see the U.S. dollar coming to any harm against that backdrop,” he said, a view further underlined by recent strong U.S. data and hawkish remarks from Fed officials.

The euro slipped 0.2% to $1.1280, close to a 16-month low. The common currency has been the prime mover in markets over recent sessions as investors wager on Europe’s economy lagging well behind the U.S. recovery.

Safe-haven assets such as bonds, gold and the yen have also benefited from the recent cautious tone in financial markets.

On Monday, the yield on benchmark 10-year U.S. Treasuries was steady at 1.5634%. Gold found support at $1,845 an ounce. The yen hovered at 114.09 per dollar.

The risk-sensitive Australian dollar also fell to a seven-week low of $0.7227. South Korean stocks were an outlier as chipmakers followed U.S. peers higher with a brightening outlook for memory chip demand. [FRX/][.KS]

rose 0.2% after Wall Street indexes had slipped on Friday. [.N]

HAVEN PLAYS

Trade is likely to be thinned this week by Thanksgiving in the United States, but the cautious tone has traders once again monitoring COVID-19 cases in Europe as well as keeping an eye on central bank speakers, particularly in Britain and Europe.

Austria began its fourth lockdown on Monday – with neighbouring Germany warning it may follow suit – as protests against restrictions occurred across the continent.

Surveys due in Europe and Britain through the week are expected to show a downward trend in output and sentiment.

“The combination of COVID, growth and geopolitical concerns in the euro zone is supportive of safe-haven plays,” said Rabobank’s head of FX strategy Jane Foley.

“The recent break below the $1.15 level and the lurch downwards that followed has forced us to lower our forecasts for the currency pair further,” she added, expecting it to sit around $1.12 by mid next year.

Meanwhile the U.S. economy has been surprising analysts with…