(Bloomberg) — Stocks slumped around the globe as investors rushed into haven assets after the delta variant cast a pall over the economic recovery, while tension between the U.S. and China escalated.
In a reversal of the reopening trade that has powered this year’s equity rally, cyclical industries bore the brunt of the selloff. Commodity, financial and industrial shares led losses in the S&P 500, which fell as much as 2% earlier Monday. Airlines tumbled with cruise operators amid concern over further travel restrictions. European shares were on track for their biggest slide of 2021, following an equity rout in Asia. Treasury 10-year yields spiraled below 1.2% for the first time since February. The dollar rose alongside the yen and the Swiss franc.
The resurgence of Covid-19 is unsettling global investors, who are considering whether new lockdown restrictions will sap the economic rebound and reverse an equity surge that had driven stocks to all-time highs. Geopolitical jitters also resurfaced after the U.S., the U.K. and their allies said the Chinese government has been the mastermind behind a series of malicious ransomware, data theft and cyber-espionage attacks against public and private entities, including the sprawling Microsoft Exchange hack earlier this year.
“Risk aversion is firmly in place as the Delta Covid variant spread is triggering a flight to safety,” wrote Edward Moya, senior market analyst at Oanda. “Equities were ripe for a pullback given Wall Street was in agreement that this is ‘as good as it gets’ for peak earnings, economic growth, monetary stimulus. It is hard to hold risky assets over the short-term now that we have past peak everything.”
For Matt Miskin, co-chief investment strategist at John Hancock Investment Management, the move to “higher-quality assets” such as Treasuries is justified. In a Bloomberg Television interview, he said that “we’re in a decelerating growth environment.”
Elsewhere, oil sank after OPEC+ agreed to boost supply into 2022. Meanwhile, Bitcoin’s selloff accelerated, pushing it closer to $30,000 once again.
For more market commentary, follow the MLIV blog.
Some key events to watch this week:
Reserve Bank of Australia meeting minutes TuesdayEuropean Central Bank rate decision ThursdayBank Indonesia rate decision ThursdayU.S. existing home sales ThursdayThe Tokyo Summer Olympics begin Friday
Here are some of the main market moves:
Stocks
The S&P 500 fell 1.5% as of 11:22 a.m. New York timeThe Nasdaq 100 fell 0.9%The Dow Jones Industrial Average fell 2.2%The Stoxx Europe 600 fell 2.2%The MSCI World index fell 1.6%The Russell 2000 Index fell 1%
Currencies
The Bloomberg Dollar Spot Index rose 0.3%The euro was little changed at $1.1797The British pound fell 0.6% to $1.3682The Japanese yen rose 0.5% to 109.49 per dollar
Bonds
The yield on 10-year Treasuries declined nine basis points to 1.20%Germany’s 10-year yield declined four basis points to -0.39%Britain’s 10-year yield declined eight basis points to 0.55%
Commodities
West Texas Intermediate crude fell 6.3% to $67.32 a barrelGold futures fell 0.4% to $1,807 an ounce
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