GLOBAL EQUITY IN RED AMID FED TAPPER FEARS
Stocks stumbled, global bond yields fell and the dollar hit a nine-month peak on Thursday as a double-whammy of Fed taper fears and COVID worries haunted equity markets and spurred a new rush into safe haven assets.
Europe’s pan-regional STOXX 600 index suffered its biggest daily decline in a month. Its 2% slide dragged the global stocks benchmark to a three week low. The CAC 40 fell more than 2% towards a three-week low and The FTSE MIB slid more than 2% headed to a two-week low on Thursday, whereas The FTSE 100 dropped more than 1.5% following its global peers, US stock futures were lower on Thursday after Wall Street closed in the red the day before following minutes from the last FOMC meeting that showed Fed officials are likely to reduce stimulus this year. Although there has been a range of views regarding the pace of tapering asset purchases, most officials noted that it could be appropriate to start reducing the pace of asset purchases soon. On the corporate side, Nvidia's earnings topped Wall Street estimates, amid strong graphic card sales. On Wednesday, the Dow fell 383 points or 1.1% to 34,961; and the S&P 500 dipped 1.1% to 4,400 after snapping a 5-day winning streak on Tuesday. The Nasdaq Composite edged 0.9% lower to 14,526, the third day of losses.
In Asia, The Nikkei 225 tumbled 305 points or 1.1% to end at over 2-1/2-month low at 27,281 on Thursday. The sentiment was also rattled by news that Toyota Motor will reduce global production for September by 40% from its previous plan due to the worldwide shortage of semiconductors, according to the Nikkei business daily. India’s The SENSEX increased 7833 points or 16.40% since the beginning of 2021, whereas the Shanghai Composite lost 20 points or 0.6% to end at 3,466 on Thursday according to trading on a contract for difference (CFD) that tracks this benchmark index.
Commodities were also under pressure with oil down for a sixth straight session and at three-month lows, while growth bellwether copper fell to its lowest in more than four months.
The dash to safe haven assets helped U.S. Treasury yields cling to recent lows, with benchmark 10-year yields at 1.23%. Euro zone government bond yields also fell with German 10-year bond yields, the benchmark for the bloc, falling a basis point to -0.49%, within touching distance of a six-month low hit earlier this month. Concerns that the peak of the economic growth rebound might have passed loomed large, fuelled by concerns over the spread of the Delta virus variant as well as supply chain issues.
Frayed nerves boosted the safe haven dollar, which rose 0.35% to $1.167 per euro, hitting its highest since November 2020 while the dollar index rose 0.3% to hit its highest since November 2020. Norway’s crown extended falls against the dollar to 1.1% after the central bank kept its key policy rate on hold at a record low of 0.0% but also said it would stick to its plan to raise interest rates next month as the economy rebounds. The CBOE Volatility index, also known as Wall Street’s fear gauge, jumped 3.66 points to its highest level in about a month overnight and the S&P 500 index fell 1% to a two-week low.
Oil prices fell for a sixth day in their longest losing streak since February 2020, with Brent crude dropping nearly $2 a barrel to trade at $66.37 and U.S. crude slipping $2.2 to trade at $63.32. The stronger dollar also weighed on gold, with the spot price dropping 0.5% to around $1,776.66.
