Global stocks drop amid fears of Delta Covid variant
European and Asian stocks and commodity prices fell, while government bonds rallied, as new outbreaks of Covid-19 clouded the outlook for the global economy.
The European Stoxx 600 index fell 1.5% and London’s FTSE 100 fell 2.1%. Japan’s Topix fell 1.3%, while Hong Kong’s Hang Seng fell 1.7%.
Government bonds extended their recent rally as investors searched for safe assets, pushing yields to multi-month lows. The 10-year US Treasury yield hit 1.259% on Monday, its lowest since mid-February. The German 10-year yield fell to minus 0.37%, the lowest since early March.
Brent crude, the international benchmark for oil, fell 2.8% to $ 71.55 a barrel, with economic growth problems compounding earlier drops caused by Opec and its allies in a deal to boost production in order to counter the rise in prices. Three-month copper futures fell 1.4 percent to $ 9,311 a tonne.
The measures came as investors grapple with the rapid spread of the highly transmissible Delta variant of Covid-19, which has struck countries that had previously brought the virus under control.
New York state on Saturday recorded more than 1,000 cases in one day for the first time since mid-May, as authorities in countries like Australia and Vietnam battled an increase in infections, Singapore has tightened social distancing restrictions and the Tokyo Olympics have been delayed by a coronavirus outbreak.
Futures markets have signaled that the Wall Street S&P 500 stock index will fall 0.7% as trading begins in New York.
The Stoxx and the US S&P 500 hit record highs earlier this month amid the exuberance over coronavirus vaccines and companies reaping the benefits of reopening economies.
“Valuations and sentiment have all reached extreme growth highs,” said Ewout van Schaick, head of multi-asset investments at NN Investment Partners. “Now, of course, the resurgence of the virus is causing uncertainty about economic progress in the months to come.”
The dollar index, which measures the greenback against major currencies and tends to gain in times of stress, rose 0.3%.
The British pound fell 0.3% against the dollar to $ 1.373, a three-month low. England lifted most coronavirus restrictions on Monday as more than half a million people, including Prime Minister Boris Johnson, were ordered to self-isolate after coming into contact with those infected and retailers and ports reported staff shortages.
The Stoxx travel sector fell 2.2%, while stocks in tourism-dependent economies also fell sharply. The Italian FTSE MIB fell 2.7% and the Spanish ibex fell 1.6%.
Michael Hood, global multi-asset strategist at JPMorgan Asset Management, said the rapid spread of the Delta variant “is forcing investors to refocus on the virus at a time when most were happy to leave this problem behind.”
Markets were also weighing on how policymakers would react to rising inflation after consumer price hikes in the US and UK unexpectedly accelerated in June.
The US Federal Reserve is under pressure to cut its $ 120 billion monthly bond purchases that have boosted markets throughout the pandemic in response to inflation trends as some UK lawmakers are pushing the Bank of England to curb its own purchases of public debt.
Additional reporting by Tommy Stubbington in London