Worries about economic recovery rock global equities, dollar par wins
- Global and European equities retreat
- Oil prices end up more than 1% on weak US production
- Tech stocks drag Wall Street down
WASHINGTON / LONDON, Sept. 8 (Reuters) – Wall Street sank and European stocks suffered their worst one-day rout in three weeks on Wednesday amid uncertainty over the pace of the economic recovery as the dollar fell its gains following the accommodating remarks of a Federal Reserve official. .
The central bank’s accommodative policies and optimism about reopening economies have pushed stocks to record highs, but concerns are growing about the impact of the rise in coronavirus infections due to the Delta variant.
The Dow Jones Industrial Average (.DJI) fell 0.2% to end at 35,029.19 points. The S&P 500 (.SPX) lost 0.13% to 4,514, with the materials, energy and technology sectors leading the declines.
The Nasdaq Composite (.IXIC) fell 0.57% to 15,286.68.
Markets are also still evaluating data from last week which shows the US economy created the fewest jobs in seven months in August, and are wondering how the US central bank will react.
The New York Fed chairman said on Wednesday that the central bank’s decision to cut rates was not indicative of the timing of the rate hike. The conciliatory remarks followed comments from the president of the Federal Bank of St. Louis that the reduction plan should go ahead despite slowing job growth. Read more
“Everything is shrinking, shrinking, shrinking. We’re looking at every central bank – when is the next one?” said Eddie Cheng, head of international multi-asset portfolio management at Wells Fargo Asset Management, adding, “The impact of the Delta variant continues to work like a wild card.”
The Dow Jones Industrial Average (.DJI) fell 76.74 points, or 0.22%, to 35,023.26, the S&P 500 (.SPX) fell 7.8 points, or 0.17%, to 4,512.23 and the Nasdaq Composite (.IXIC) lost 87.96 points, or 0.57%, to 15,286.37 at 2:17 p.m. EST (6:17 p.m. GMT).
MSCI’s global stock index (.MIWD00000PUS) fell 0.42% after seven straight days of gains and European stocks (.STOXX) fell to their lowest in nearly three weeks. The UK FTSE 100 (.FTSE) hit a two-week low.
“September is the month when investors face reality,” said Peter Tuz, chairman of Chase Investment Counsel in Charlottesville, Va., Highlighting uncertainty over the Fed’s cut plans and inflation fears as the reason for which investors take profits or reallocate funds.
The variant of the Delta coronavirus and concerns about the economic recovery also weighed in.
A Fed report released on Wednesday showed the US economy “deteriorated slightly” in August as concerns grew about how the new wave of coronavirus cases would affect the economic recovery. Read more
“What awaits us is a continued but temporary deceleration in economic activity of one to three months which probably started in August,” said Sébastien Galy, senior macro strategist at Nordea Asset Management, earlier in the report. session.
Federal official Robert Kaplan was due to speak later Wednesday.
In Europe, markets have questioned whether the European Central Bank will start cutting its bond buying program this week.
The dollar made some gains after hitting a one-week high against a basket of other major currencies. It also hit a one-week high against the single currency and was trading at $ 1.1826.
The strength of the dollar offset investor risk aversion to put pressure on bullion to a two-week low. Spot prices fell 0.1% and gold futures stabilized 0.3% at $ 1,793.50.
Longer-dated US government bond yields fell on Wednesday and hit a session low after a strong 10-year Treasury auction and the Fed’s beige book on economic activity.
The 10-year German Bund yield also hit eight-week highs before falling back to -0.32%.
“Fears that central banks will start cutting back on asset purchases seem to have shaken confidence a bit, especially given tomorrow’s ECB decision where many expect we will start to see the start of this process, especially with inflation at its highest level in nearly a decade, “Deutsche Bank analysts said in a note.
The largest MSCI index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) fell 0.71%, ending a string of eight sessions of gains.
Bitcoin extended yesterday’s rout, down 1.6%.
Shares of Coinbase Global Inc (COIN.O) fell more than 3% after the company revealed it had received legal advice from the main US market regulator. Read more
Brent stabilized at 1.3% at $ 72.60 per barrel and U.S. West Texas Intermediate (WTI) crude at 1.4% at $ 69.30 per barrel, with prices supported by a slow rebound in production in the Gulf of Mexico after Hurricane Ida struck the region.
Additional reporting by Alun John in Hong Kong; Editing by Kenneth Maxwell & Shri Navaratnam, Editing by Nick Tattersall and Alistair Bell
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