(Bloomberg) — U.S. equity futures fell on Monday and stocks in Europe headed for a seven-week low as the spread of the delta variant around the world threatens the global economic recovery. Treasuries gained along with the dollar.
The Stoxx Europe 600 index retreated for a fourth straight session, the longest streak of losses since October. Banks and basic resources led the decline along with travel and leisure stocks as all market sectors slid deeply into the red. The rally in Treasuries continued, sending 10-year yields further below 1.3%.
The pound slumped to a three-month low and the FTSE 100 tumbled 1.9% after the U.K. lifted remaining virus curbs in England even as virus cases increased the most in the world, signaling the challenge nations face to fully reopen their economies.
The resurgence of Covid-19 is stoking a risk-off mood as investors consider whether new lockdown restrictions will sap the economic rebound and reverse an equity rally that had driven stocks to record highs. The decline in Treasury yields may be a signal of cracks in the global recovery, putting the onus back on monetary and fiscal authorities to support ailing economies even as inflation remains elevated.
The risk-off mood “reflects growing concerns about the delta variant with the rebound in new cases across the world and the tightening of containment measures in several Asian countries,” Credit Agricole COB strategists led by Jean-François Paren wrote in a note. “As the pandemic and economic prospects become more uncertain, it is again the role of central banks and governments to compensate for the worsening outlook.”
Data at the end of last week showed retail sales remained robust in the U.S. but consumer sentiment unexpectedly declined as mounting concerns over rising prices led to a deterioration in buying conditions for big-ticket items.
Another week of major earnings reports lies ahead. While stock bulls hope they will provide support for equities, companies are evidently also focused on price pressures. The word “inflation” was mentioned on 87% of the earnings conference calls by S&P 500 companies tracked by Bloomberg this month, compared with 33% in the same period a year ago.
Elsewhere, crude oil declined after OPEC+ struck a deal to increase output. MSCI Inc.’s gauge of Asia-Pacific shares hit the lowest in about a week, with Japan and Hong Kong underperforming and technology stocks struggling. Emerging-market stocks and currencies weakened.
For more market commentary, follow the MLIV blog.
Here are 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
And here are some of the main market moves:
Stocks
Futures on the S&P 500 fell 0.6% as of 6 a.m. New York timeFutures on the Nasdaq 100 fell 0.3%Futures on the Dow Jones Industrial Average fell 0.9%The Stoxx Europe 600 fell 1.6%The MSCI World index fell 0.6%
Currencies
The Bloomberg Dollar Spot Index rose 0.3%The euro fell 0.2% to $1.1780The British pound fell 0.2% to $1.3745The Japanese yen rose 0.2% to 109.81 per dollar
Bonds
The yield on 10-year Treasuries declined three basis points to 1.26%Germany’s 10-year yield declined one basis point to -0.37%Britain’s 10-year yield declined one basis point to 0.61%
Commodities
West Texas Intermediate crude fell 2.4% to $70.07 a barrelGold futures fell 0.6% to $1,804.30 an ounce
More stories like this are available on bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2021 Bloomberg L.P.
