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U.S. Futures Slump Most in a Month; Bonds Climb: Markets Wrap

U.S. Futures Slump Most in a Month; Bonds Climb: Markets Wrap

(Bloomberg) — U.S. equity futures tumbled with stocks globally on Thursday as fears of a second wave of the virus and a cautious outlook from the Federal Reserve clouded hopes for a speedy economic recovery.

Contracts on the S&P 500 Index fell by the most in a month after Fed Chairman Jerome Powell suggested the pandemic could inflict long-lasting damage on the economy. Reports of coronavirus infection rates jumping in parts of America added to the risk-off mood, with cruise operators and airlines slumping in pre-market trading. The Stoxx Europe 600 Index sank by the most in five weeks, with sectors scooped up in the recent rally such as banks and travel leading declines.

Treasuries continued higher alongside German bunds on haven demand, while the dollar rebounded from Wednesday’s losses.

“This is the first time we’ve had a little bit of negative newsflow recently” on developments in the coronavirus, Dean Turner, economist at UBS Global Wealth Management, told Bloomberg TV. “Put that in the context of how far markets have come in the last few weeks, it’s not at all surprising that we get a little bit of profit-taking at this stage.”

Stocks are catching their breath after a strong rally from March lows as investors weigh a rocky road to economic recovery against promised stimulus measures. U.S. virus cases now top 2 million, with fears of a second wave in Texas and Florida. Treasury Secretary Steve Mnuchin said the U.S. “definitely” needs more fiscal stimulus, supporting prospects for another round this summer. European policy makers meet Thursday to decide whether to boost aid.

Investors are also digesting the Fed’s decision to leave its policy settings unchanged while pledging to keep buying bonds. Powell said the central bank had a briefing on yield-curve control, amid expectations from some economists that the central bank will follow Australia’s and Japan’s in adopting such a tool.

Elsewhere, Japanese and Australia benchmarks led a broad decline among Asia equity markets. Crude oil declined while gold held onto most of Wednesday’s gain.

What to watch this week:

Euro-area finance ministers meet Thursday to discuss the EU’s recovery package and Eurogroup presidency succession.

These are some of the main moves in markets:

Stocks

Futures on the S&P 500 Index sank 2% as of 7:14 a.m. New York time.The Stoxx Europe 600 Index sank 2.5%.The MSCI Asia Pacific Index decreased 1.9%.The MSCI Emerging Market Index decreased 1.2%.

Currencies

The Bloomberg Dollar Spot Index jumped 0.5%.The euro was little changed at $1.137.The British pound sank 0.6% to $1.2673.The onshore yuan weakened 0.1% to 7.068 per dollar.The Japanese yen strengthened 0.1% to 107.01 per dollar.

Bonds

The yield on 10-year Treasuries fell two basis points to 0.70%.The yield on two-year Treasuries climbed one basis point to 0.17%.Germany’s 10-year yield decreased five basis points to -0.39%.Britain’s 10-year yield fell four basis points to 0.224%.Japan’s 10-year yield dipped one basis point to 0.011%.

Commodities

West Texas Intermediate crude declined 3.9% to $38.06 a barrel.Brent crude dipped 3.3% to $40.37 a barrel.Gold weakened 0.4% to $1,732.59 an ounce.

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