(Bloomberg) — Stocks and U.S. equity futures slipped Monday and Treasuries climbed on concerns that the economic recovery from the pandemic is slowing as the fast-spreading delta virus strain hampers reopening.
Japanese shares slid and haven demand spurred the yen amid expectations a virus state of emergency in some regions including Tokyo will be extended. Chinese technology stocks slumped after more criticism of online gaming from state media. The latest China retail sales and industrial output data showed activity slowed more than expected, with virus outbreaks adding new risks.
S&P 500, Nasdaq 100 and European equity contracts retreated. A drop in U.S. consumer sentiment to a near-decade low added to the mood of caution. Treasury yields fell, the dollar firmed and Australia’s currency declined.
Investors are also tracking alarm in Congress as the Taliban take control of Afghanistan in the vacuum left by departing U.S. and NATO forces. President Joe Biden’s economic agenda is already facing lawmaker obstacles, after some House Democrats threatened to withhold support from a $3.5 trillion budget blueprint until a bipartisan infrastructure package is signed into law.
Equities in the U.S. and Europe hit records last week, bolstered by vaccine rollouts. But the delta variant remain a threat: there are fears the world may struggle to reach herd immunity, where the pathogen stops spreading rapidly because enough people are shielded against it. Inoculations are lagging in Asia, pressuring its markets, while in China expectations of monetary policy easing are growing to cushion the nation’s recovery.
“July’s data suggest the economy is losing steam very fast,” said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. “The resurgence of delta also adds extra risk to August’s activities.”
Traders will be monitoring the Federal Open Market Committee’s latest minutes this week and a speech by Federal Reserve Chair Jerome Powell for more clues about the likely timeline for a tapering in the U.S. central bank’s $120 billion in monthly bond purchases.
“Shares remain vulnerable to a short-term correction with possible triggers being the upswing in global coronavirus cases, the inflation scare and U.S. taper talk,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital.
Elsewhere, crude oil dropped for a third day as the continued spread of the delta variant hurts prospects for global demand, just as drilling data from the U.S. points to increased activity. Bitcoin was trading around $47,500.
Here are some events to watch this week:
U.S. Federal Reserve Chair Jerome Powell hosts a town hall discussion with educators TuesdayChina’s top legislative body, the National People’s Congress Standing Committee, begins a four-day meeting in Beijing TuesdayU.S. retail sales are due TuesdayReserve Bank of Australia minutes are scheduled to be released TuesdayReserve Bank of New Zealand policy decision and briefing by Governor Adrian Orr WednesdayFOMC minutes released WednesdayBank Indonesia rate decision and Governor Perry Warjiyo briefing Thursday
For more market analysis read our MLIV blog.
These are the main moves in markets:
Stocks
S&P 500 futures fell 0.2% as of 1:42 p.m. in Tokyo. The S&P 500 rose 0.2% FridayNasdaq 100 futures slid 0.1%. The Nasdaq 100 rose 0.3%Japan’s Topix index dropped 1.7%Australia’s S&P/ASX 200 Index shed 0.2%Hong Kong’s Hang Seng Index lost 0.7%China’s Shanghai Composite Index added 0.4%Euro Stoxx 50 futures fell 0.4%
Currencies
The Japanese yen traded at 109.43 per dollar, up 0.2%The offshore yuan was at 6.4781 per dollarThe Bloomberg Dollar Spot Index edged up 0.1%The euro was at $1.1792
Bonds
The yield on 10-year Treasuries declined two basis points to about 1.26%Australia’s 10-year bond yield fell seven basis points to 1.15%
Commodities
West Texas Intermediate crude fell 1.1% to $67.66 a barrelGold was at $1,776.12 an ounce
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