* Shanghai shares hit five-year high on service sectorrecovery
* U.S. payrolls jump 4.8 mln but hurdles lie ahead
* European markets have subdued end to week
* Copper on best weekly run in nearly three years
* Rising U.S. COVID-19 cases threaten U.S. recovery
* Graphic: World FX rates in 2020
*
By Marc JonesLONDON, July 3 (Reuters) - World shares stalled near afour-month high on Friday and the industrial bellwether metalcopper scuffed its longest weekly winning streak in nearly threeyears, as nagging coronavirus nerves tempered the recentrecovery run.
The market rally, fuelled by Thursday's record U.S. jobsnumbers, largely blew itself out after a record daily total ofnew U.S. COVID-19 cases, though news of the fastest expansion inChina's services sector in over a decade kept Asia's tail upearly in the day.Chinese shares had charged to their highest level in fiveyears, helping the pan-Asian indexes to four-monthpeaks, so the sight of European markets stalling left tradersfloundering, especially with no Wall Street to pick things upagain because of a U.S. market holiday. Currency and commodity markets were also subdued after anotherwise strong week for confidence-sensitive stalwarts suchoil , copper , sterling and theAustralian dollar , which all struggled on Friday.More than three dozen U.S. states are now seeing increasesin COVID-19 cases, including Florida, where they have leaptabove 10,000 a day. And while Europe is largely easingrestrictions, some places are having to keep them or reimposethem again."I think infection rates and fears of localised lockdownshave doused some of the enthusiasm," said Societe Generalestrategist Kit Jukes."We have three elements now; vaccine hopes, decent data inmost places - but also the return of infection rates, which canmake you nervous."
London, Paris and Frankfurt's stock markets were down 1.2%,0.4% and 0.8% respectively as trading began to wind down,although all were up for the week. The euro and pound were alsofractionally lower, though it was barely noticeable thanks tothe dollar's second dip of the week . The euro was at $1.1226 and though it gainedagainst the safe Swiss franc it fell versus thered-hot Norwegian crown , which has been on the risefor months, in tandem with most petrocurrencies.
S&P 500 futures were down 0.2% but volumes were lowdue to the U.S. market holiday for Independence Day.The previous day's U.S. non-farm payrolls had shown awell-above-forecast 4.8 million surge in jobs in June. It camelargely thanks to rises in the hard-hit hospitality sectors,though economists did note some caveats. The number of permanent job losses continued to rise,increasing by 588,000 to 2.9 million, while the unemploymentrate remains a chunky 7.6 percentage points above its Februarylevel. A Deutsche Bank analysis put the U.S. unemployment ratebehind all its developed market peers, barring Canada.
WILL THE BEARS BITE BACK?The recovery faces headwinds as the surge of new coronavirusinfections prompts U.S. states to delay and in some casesreverse plans to let stores and restaurants reopen andactivities resume. BofA said in a report on Friday that $7.1 billion had beenwas pulled out of equity funds over the last week, and itsclosely-followed 'Bull & Bear' indicator was out of "buy"territory for the first time since March 17. Nevertheless, investors seem to have been largelyoverlooking the various virus spikes for now at least, andtaking the view that things are still improving globally.A market fear gauge, the VIX volatility index , hasseen its biggest drop in two months and German government bondyields were set for their biggest weekly rise in a month, thoughthey nudged down on Friday to -0.44%.
Riskier Italian yields fell to 1.26% as well though, whichis their lowest since late March, at the peak of Europe'scoronavirus lockdown. Oil prices also eased after an otherwise solid week. Brentcrude fell 0.65% to $42.86 a barrel while U.S. crude dropped 0.66% to $40.38 a barrel. Both were around $25this time two months ago.Copper prices were poised for a seventh consecutive weeklygain, their longest winning streak in nearly three years, thoughit too was slightly down on the day at $6,040 a tonne ,more than $1,500 up from lows it plumbed in March. "The one issue that hangs over all the markets is 'Will wesee a surge in secondary infections that will trigger a secondwave of national rather than regional shutdowns?'," MalcolmFreeman, director of Kingdom Futures, wrote in a note.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^COVID-19 in U.S. China recovery Financial markets battle rise of COVID-19 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Marc Jones; Editing by Kevin Liffey)