World stocks fall from record high, dollar firm on economy worries

September 8, 2021

By Carolyn Cohn and Alun John

LONDON/HONG KONG (Reuters) – World stocks fell from the previous session’s record highs and European stocks dropped on Wednesday on caution over the pace of economic recovery, while the dollar hit one-week highs as investors reduced exposure to riskier assets.

Accommodative central bank policies and optimism about reopening economies have pushed world stocks to record highs, but concerns are growing about the impact of rising coronavirus infections due to the Delta variant.

Markets are also still assessing data from last week which showed the U.S. economy created the fewest jobs in seven months in August.

The Fed should move forward with a plan to taper its massive asset purchase programme despite the slowdown in job growth, St. Louis Federal Reserve Bank President James Bullard said in an interview with the Financial Times on Wednesday.

“Everything is tapering, tapering, tapering. We are looking at every single central bank – when is the next one?” said Eddie Cheng, head of international multi-asset portfolio management at Wells Fargo Asset Management, though he added: “the Delta variant impact is still running like a wild card”.

MSCI’s world equity index .MIWD00000PUS fell 0.24% after seven consecutive days of gains.

European stocks .STOXX fell more than 1% to their lowest in nearly three weeks. Britain’s FTSE 100 .FTSE dropped 0.85% to two-week lows.

S&P futures ESc1 fell 0.34% after the S&P 500 .SPX lost 0.34% overnight. The Nasdaq Composite .IXIC hit record highs as investors favoured Big Tech stocks, which have performed well during the pandemic.

“What is likely ahead of us is a continued but temporary deceleration of economic activity of one to three months which likely started in August,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.

In Europe, markets are focused on whether the European Central Bank will this week begin to scale back its bond purchase programme.

The dollar hit a one-week high against the single currency EUR= and against an index of currencies =USD, recovering from recent five-week lows.

Yields on 10-year Treasury notes US10YT=RR fell to 1.3529% compared to a U.S. close of 1.371% on Tuesday, retreating from this week’s eight-week highs. Germany’s 10-year Bund yield edged lower to -0.329% DE10YT=RR.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.68%, having stretched its gains in the past eight sessions.

Australia .AXJO slipped 0.24%, Hong Kong .HSI shed 0.45% and Chinese blue chips .CSI300 dropped 0.41%, also weighed down by recent soft data in the world’s second-biggest economy.

Bucking the regional trend, Japan’s Nikkei .N225 gained 0.89% to a five-month high, helped by revised gross domestic product growth figures beating expectations.

Bitcoin BTC=BTSP paused for breath after plunging 17% on Monday to a low of around $43,000 before recovering. It was last at $45,170, down 3.67%.

U.S. crude oil CLc1 rose 0.42% to $68.64 a barrel and Brent crude LCOc1 gained 0.33% to $71.92 per barrel, with prices supported by a slow production restart in the U.S. Gulf of Mexico after Hurricane Ida hit the region.

Gold XAU= gained 0.21% to $1797.25 per ounce in line with the risk-averse mood and just below the psychologically key $1,800 level which it fell through in the previous session.

(Editing by Kenneth Maxwell & Shri Navaratnam, Editing by William Maclean)

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