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World stocks pause rally on J&J news, dollar bounces from three-week low

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The dollar rose from a three-week low on Tuesday while US and European shares eased, as news of pauses in trials of a COVID-19 vaccine and a treatment led investors to take stock of recent rallies before chasing further gains.

Some analysts said the stock market pullback did not indicate a deeper aversion to risk, since many investors are convinced that more US fiscal stimulus is on the way, even if it may not be unveiled until after the November 3 US election.

Still, demand firmed for traditional safe-haven assets such as the dollar and government bonds. A stronger dollar in turn weighed on gold prices.

China trade data released overnight signaling a rebound in the world’s second-largest economy was mostly brushed aside by stock and bond markets, though it boosted oil prices as investors hoped for a slow recovery in energy demand.

The S&P 500 fell 22.5 points, or 0.64%, to 3 511.76, but still within sight of its record high of 3 580.84 struck on September 2. In the last 2-1/2-weeks, the index has rebounded 8.5%.

The Dow Jones Industrial Average dopped 157.2 points, or 0.55%, to 28 680.33. The Nasdaq Composite pared earlier gains to lose 12.4 points, or 0.1%, to 11 863.90 points.

Shares in Johnson & Johnson sagged 2.6% as investors digested news that a participant in its COVID-19 vaccine trial had fallen ill, and that it would take at least a few days to evaluate the situation.

News late in the day that US drug-maker Eli Lilly and Co had also paused the clinical trial of its COVID-19 antibody treatment due to a safety concern led the US equity market to deepen losses in the final minutes of trading.

Shares in Eli Lilly closed down 2.85%.

Investors see the quick introduction of a vaccine as key to helping economies recover. J&J’s news came after rival AstraZeneca which uses similar technology, paused the trial of its experimental vaccine in September due to a participant’s unexplained illness.

“Markets have already priced in perfection,” said Ken Polcari, chief market strategist at SlateStone Wealth LLC in Florida. “It’s ‘buy the rumor, sell the news.’”

European shares also struggled as investors found a reason in news of Johnson & Johnson’s delayed trial to take profits.

The Euro STOXX 600 lost 0.77%, ending three straight days of gains, with markets in Frankfurt, London and Paris mirroring its moves.

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