Shares recouped some of their early losses on Friday and the dollar hit a one-week low but held in recent ranges, as cautious investors adjusted risk exposure before the U.S. election and record COVID-19 cases in Europe weighed on sentiment.

The MSCI world equity index, which tracks shares in 49 countries, was flat on the day at 1057 GMT.

Europe’s STOXX 600 was also flat, having fallen in early trading as fears about the economic impact of lockdown restrictions outweighed some strong earnings, while MSCI’s main European Index was up 0.3%

With two weeks until the U.S. presidential elections, analysts said investors were reining in their riskier bets.

“Ultimately investors don’t really know which way to push this market. Things aren’t bad enough to go completely risk-off simply because there’s an expectation that we will get some form of further stimulus some day in the future,” said Michael Hewson, chief market analyst at CMC Markets UK.

“This close to presidential election, if you’re wise, you’ll sit on your hands.”

U.S. stock futures were up, pointing to more bullishness in Wall Street. S&P 500 E-minis were up 0.8% at 1110 GMT and Dow E0minis rose 0.7%.

Analysts generally expect more fiscal stimulus from Washington after the elections if Democratic candidate Joe Biden - who is ahead in the polls - wins.

Biden and President Donald Trump will debate each other in an event on Thursday which will feature a mute button to allow each candidate to speak uninterrupted.

U.S. fiscal stimulus talks were also in focus, as House Speaker Nancy Pelosi set the end of Tuesday as a self-imposed deadline for reaching a deal on a coronavirus aid package.

Pelosi said over the weekend she was optimistic legislation could be pushed through before the election.
COVID CAUTION

In Europe, tougher restrictions to limit the spread of the pandemic suppressed risk appetite.

Ireland announced some of Europe’s strictest curbs on Monday, telling people not to travel more than five kilometres(three miles) from home. New restrictions were also approved in the Lombardy region of Italy.

France reported a large increase in the number of people hospitalised with the coronavirus.

The dollar fell against a basket of currencies, touching its lowest levels in a week. At 1103 GMT, it was down 0.2% on the day at 93.19. Riskier currencies including as the Aussie and Kiwi dollars were down, but the safe-haven yen also slipped.

The pound edged down versus the euro, as Brexit negotiations appeared stuck in limbo. The British government has said it sees no basis to restart the talks with the European Union unless there is a fundamental change in approach.

Euro zone government bond yields rose, with the benchmark 10-year German yield retreating from recent seven-month lows at -0.613%.

Gold edged down while oil prices were little changed after three days of declines on fears that a resurgence of COVID-19 infections would stifle the recovery in fuel demand.

Brent crude futures were trading down up 0.1% at $42.66 a barrel by 1107 GMT, recovering ground after falling as low as $42.19 earlier in the session.