Stocks, Futures Fall, Bonds Rise on Growth Concern: Markets Wrap

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(Bloomberg) — European stocks fell with Asian equities and U.S. futures amid growing anxiety that the spread of Covid-19 variants will upend growth expectations. Bonds rallied.

Contracts on the the S&P 500 and Nasdaq 100 signaled a retreat from new records set Wednesday in the underlying gauges. European stocks tumbled 1% at the open, with every industry sector in the red. Ten-year U.S. Treasury yields continued their descent to the lowest levels since February as U.S. inflation expectations ease.

Traders are getting edgy over whether the rapid spread of the delta strain will knock back growth and prospects for central bank normalization. In Europe, policy makers showed they were ready to extend ultra-loose policy as they agreed to raise their inflation goal to 2% and allow room for an overshoot when needed, according to officials familiar with the matter.

The dollar and yen firmed on haven demand. Oil declined as investors await further signals from the OPEC+ alliance on production plans after a breakdown in talks.

Central bank stimulus plans remain critical to the market outlook, especially the fate of the Federal Reserve’s $120 billion in monthly bond purchases. In minutes of their last meeting, Fed officials weren’t ready to communicate a schedule for scaling back their bond-buying program, due to high uncertainty over the course of the recovery. They did, however, want to establish a plan in case a move is needed sooner.

“We are taking a breather and reassessing where the interest rate trajectory is,” Jun Bei Liu, portfolio manager at Tribeca Investment Partners, said on Bloomberg Television. “The actual recovery path is never going to be straight. Caution is definitely settling in and the focus is on which economy will come out of this first.”

Covid-19 trends are also causing jitters. The pandemic’s global death toll has surpassed 4 million as the delta variant spreads, and the World Health Organization urged caution on reopenings worldwide.

For more market commentary, follow the MLIV blog.

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Here are some events to watch this week:

The Group of 20 finance ministers and central bankers meet in Venice on FridayChina PPI and CPI data released on Friday

These are some of the main moves in markets:

Stocks

Futures on the S&P 500 Index decreased 0.8% as of 8:55 a.m. London time.The Stoxx Europe 600 Index decreased 1.1%.The MSCI Asia Pacific Index declined 1.1%.The MSCI Emerging Market Index sank 1.6%.

Currencies

The Bloomberg Dollar Spot Index was little changed.The euro gained 0.2% to $1.1815.The British pound declined 0.2% to $1.3778.The onshore yuan weakened 0.1% to 6.482 per dollar.The Japanese yen strengthened 0.8% to 109.80 per dollar.

Bonds

The yield on 10-year Treasuries fell three basis points to 1.28%.The yield on two-year Treasuries decreased less than one basis point to 0.21%.Germany’s 10-year yield declined three basis points to -0.32%.Japan’s 10-year yield fell one basis point to 0.024%.Britain’s 10-year yield fell three basis points to 0.569%.

Commodities

West Texas Intermediate crude declined 1.1% to $71.42 a barrel.Brent crude dipped 0.9% to $72.75 a barrel.Gold strengthened 0.3% to $1,809.76 an ounce.

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