A general view shows the National Stadium, main venue for the Tokyo 2020 Olympic and Paralympic Games, in Tokyo on July 8, 2021.
AFP via Getty Images
Global stocks slumped while the bond rally continued on Thursday, on jitters around how the economy would perform without as much fiscal and monetary stimulus next year as well as the lingering coronavirus that is denting reopening hopes.
Futures on the Dow Jones Industrial Average fell 436 points, or 1.3%, while S&P 500 futures dropped 1.2%, and Nasdaq Composite futures declined 1.3% after both closed at record highs on Wednesday. The 10-year U.S. Treasury yield slumped 0.06 percentage point to 1.261%.
“While stocks have been on a tear, hitting all-time highs last month, the mood in the markets is starting to sour,” writes Oanda’s Sophie Griffiths.
The Nikkei 225 lost 0.9% in Tokyo, where investors had to consider the news the Olympics will likely be held without spectators as Japan declared a new state of emergency until late August due to the spread of coronavirus.
The Hang Seng lost nearly 3%, with tech stocks including Alibaba and Tencent retreating amid China’s tightening regulatory regime.
But the decline was spread across all major markets. The Stoxx Europe 600 fell more than 1% after ending Wednesday at its second-highest level ever.
“Market concern about the virus can be seen in the relative performance of sectors that benefit from reopening the economy, such as airlines and hotels. Those sank yesterday even while the overall markets rose,” said Marshall Gittler, head of investment research at BDSwiss Holding.
It was the first opportunity for overseas investors to react to the latest minutes coming from the U.S. Federal Open Market Committee, which showed division on the timing for reducing the rate of bond purchases. That didn’t come as a surprise since officials have been airing their disparate views in public. “Overall, the Fed is struggling to form a consensus on the direction of the asset purchase program,” said Tim Duy, chief U.S. economist at SGH Macro Advisors.
The European Central Bank meanwhile is going to announce the results of its strategy review, in which the central bank is expected to move from targeting inflation below but close to 2%, to a symmetric 2% target, which is in line with other central banks. The announcement is set for 1 p.m. local time, or 7 a.m. Eastern, followed by a press conference with ECB President Christine Lagarde.
