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Stocks, futures fall, bonds rise on growth concern: markets wrap

The dollar and yen firmed on haven demand.
Image: Soichiro Koriyama/Bloomberg

European stocks fell with Asian equities and US 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 US Treasury yields continued their descent to the lowest levels since February as US 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 normalisation. 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 Organisation urged caution on reopenings worldwide.

© 2021 Bloomberg

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