(Bloomberg) — Global stocks tumbled, with S&P 500 Index futures down for a third day, while Treasuries and the dollar rallied as concern about the withdrawal of Federal Reserve stimulus mixed with growing angst around the virus and global supply chains. For a fifth straight month, volatility was whipping up around the time stock options were expiring in the U.S.
Contracts on the S&P 500 Index lost as much as 1.1% and the equity fear gauge headed for the biggest weekly increase since January. A selloff in commodities deepened, as iron ore plunged more than 10% and oil headed for the longest slump since the early days of the pandemic. The 10-year Treasury yield shed three basis points and the greenback headed for a nine-month high.
Investors are bracing for the withdrawal of unprecedented liquidity 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 winding down of quantitative easing. That’s pushing them to buy protection against equity swings.
“The U.S. equity markets are overdosed with cheap liquidity and keep posting new highs despite a sticky global pandemic, repeated lockdown measures, shattered economies, lost jobs, hammered lives and escalating inflation,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank. “Therefore, any hint on QE tapering could have a meaningful impact on the market sentiment.”
Souring investor sentiment echoed in U.S. premarket trading where China-linked stocks including Alibaba Group Holding Ltd. plunged. Luxury shares in Europe fell as China seemed to put its wealthiest on notice in favor of a “common prosperity.” Emerging-market equities plunged to this year’s low.
Commodities took the brunt of the capital flight, with the Bloomberg gauge for the group falling to a one-month low. Iron-ore futures in Singapore sank as much as 14%. West Texas Intermediate crude dropped for a sixth day. Copper traded at the lowest level since April. Commodity-linked currencies including the New Zealand and Australian dollars weakened.
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.
Alibaba tumbled to a record low in Hong Kong after China hit the industry with a fresh round of regulations. The company’s U.S. shares slid 3.7% in premarket New York trading.
NetEase Inc. and JD.com Inc. lost at least 3.6% each as U.S. investors dumped the New York listings of Chinese stocks.
Bitcoin, too, succumbed to the risk-off shift and fell for a fourth day, trading around $44,300 apiece.
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
Futures on the S&P 500 fell 0.8% as of 8:19 a.m. New York timeFutures on the Nasdaq 100 fell 0.7%Futures on the Dow Jones Industrial Average fell 0.9%The Stoxx Europe 600 fell 2%The MSCI World index fell 0.8%
Currencies
The Bloomberg Dollar Spot Index rose 0.3%The euro fell 0.1% to $1.1698The British pound fell 0.6% to $1.3677The Japanese yen rose 0.1% to 109.65 per dollar
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
West Texas Intermediate crude fell 3.4% to $63.22 a barrelGold futures rose 0.1% to $1,786.50 an ounce
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