Stocks to Commodities Sink on Fed Taper Worries: Markets Wrap

(Bloomberg) — Global markets tumbled across the board, as investors fled to the safety of U.S. Treasuries and the dollar, amid concern the Federal Reserve may start tapering stimulus this year even as the delta virus variant undermines global growth.

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U.S. stock-index futures fell, with contracts on the S&P 500 Index losing as much as 1.1%, and European stocks slid the most in a month. A selloff in commodities deepened, as iron ore plunged more than 10% and oil headed for the longest slump since the early days of the pandemic. The 10-year Treasury yield shed three basis points and the greenback headed for a nine-month high.

Investors are bracing for the withdrawal of unprecedented liquidity as the developed world looks to mass vaccinations to keep the recovery on track. However, the persistent spread of coronavirus and slowing China growth raise questions about whether the global economy can absorb the shock of reduced support.

“I don’t think anybody will be surprised if tapering starts at the end of this year,” Dana D’Auria, Envestnet co-chief investment officer, said on Bloomberg Television. She added that the pace of reopenings is a concern for investors amid the spread of the delta strain.

Souring investor sentiment echoed in U.S. premarket trading where China-linked stocks including Alibaba Group Holding Ltd. plunged. Luxury shares in Europe fell as China seemed to put its wealthiest on notice in favor of a “common prosperity.” Emerging-market equities plunged to this year’s low. All that meant a gauge of world stocks was poised for the worst week since February.

Commodities took the brunt of the capital flight, with the Bloomberg gauge for the group falling to a one-month low. Iron-ore futures in Singapore sank as much as 14%. West Texas Intermediate crude dropped for a sixth day. Copper traded at the lowest level since April 1. Commodity-linked currencies including the New Zealand and Australian dollars weakened more than 1% each.

The next key moment for investors is the Fed’s conference at Jackson Hole, Wyoming during Aug. 26-28, with some expecting an announcement on the time line of stimulus reduction. Minutes from the central bank’s July meeting showed that most policy makers agreed the tapering could start later this year.

Treasury yields fell across the curve on Thursday. The 10-year rate hovered near 1.23%, extending its slide since March to 51 basis points.

Alibaba tumbled to a record low in Hong Kong after China hit the industry with a fresh round of regulations. The company’s U.S. shares slid 3.8% in premarket New York trading.

NetEase Inc. and JD.com Inc. lost at least 3.6% each as U.S. investors dumped the New York listings of Chinese stocks.

Bitcoin held out against the losses, trading at around $44,800 apiece.

For more market analysis read our MLIV blog.

Here are some events to watch this week:

Bank Indonesia rate decision and Governor Perry Warjiyo briefing ThursdayU.S. initial jobless claims Thursday

Some of the main moves in markets:

Stocks

Futures on the S&P 500 fell 0.6% as of 6:06 a.m. New York timeFutures on the Nasdaq 100 fell 0.4%Futures on the Dow Jones Industrial Average fell 0.6%The Stoxx Europe 600 fell 1.8%The MSCI World index fell 0.7%

Currencies

The Bloomberg Dollar Spot Index rose 0.3%The euro fell 0.1% to $1.1694The British pound fell 0.5% to $1.3690The Japanese yen was little changed at 109.70 per dollar

Bonds

The yield on 10-year Treasuries declined three basis points to 1.23%Germany’s 10-year yield declined one basis point to -0.49%Britain’s 10-year yield declined three basis points to 0.54%

Commodities

West Texas Intermediate crude fell 3.4% to $63.24 a barrelGold futures rose 0.3% to $1,790.60 an ounce

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