(Bloomberg) — U.S. Treasuries and the dollar rallied, while stock-index futures plummeted, amid concern the Federal Reserve may start tapering stimulus this year even as the delta virus variant undermines global growth.
The 10-year rate shed two basis points and the greenback headed for the highest level since November. Futures on the S&P 500 Index lost 0.7% and those on the Russell 2000 gauge plunged more than 1%. Oil declined for a sixth day. A gauge of world stocks headed for the worst week since February.
Investors are bracing for the withdrawal of unprecedented liquidity in global markets 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.
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.
European stocks slid the most in a month. MSCI Inc.’s gauge of Asia-Pacific shares fell 1.8% as Chinese technology stocks struggled. Alibaba Group Holding Ltd. plunged as much as 6.5% to a record low in Hong Kong after China hit the industry with a fresh round of regulations..
The Bloomberg Commodity Index fell to a one-month low with oil copper and iron ore all slumping. Commodity-linked currencies including the New Zealand and Australian dollars fell.
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
The Stoxx Europe 600 fell 1.3% as of 8:32 a.m. London timeFutures on the S&P 500 fell 0.7%Futures on the Nasdaq 100 fell 0.7%Futures on the Dow Jones Industrial Average fell 0.7%The MSCI Asia Pacific Index fell 1.8%The MSCI Emerging Markets Index fell 2%
Currencies
The Bloomberg Dollar Spot Index rose 0.4%The euro fell 0.3% to $1.1677The Japanese yen fell 0.1% to 109.88 per dollarThe offshore yuan fell 0.2% to 6.4986 per dollarThe British pound fell 0.4% to $1.3701
Bonds
The yield on 10-year Treasuries declined two basis points to 1.23%Germany’s 10-year yield was little changed at -0.49%Britain’s 10-year yield declined three basis points to 0.54%
Commodities
Brent crude fell 2.1% to $66.80 a barrelSpot gold fell 0.4% to $1,779.79 an ounce
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