- US futures tumbled in European trading on Thursday as investors reassessed the economic outlook.
- Bond yields, which move inversely to prices, also fell as investors took cover in the safe assets.
- Investors are concerned about the delta COVID-19 variant and central bank policy, analysts said.
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US stock futures fell sharply on Thursday, as doubts crept in about the strength of the global economic recovery, and concerns grew about the delta coronavirus variant.
Meanwhile, bond yields fell for the eighth session in a row as investors bet that inflation would be weaker than previously expected.
S&P 500 futures fell 1% in European trading on Thursday, after the benchmark US index rose 0.34% a day earlier. Nasdaq 100 futures dropped 1.05% and Dow Jones futures slipped 1.08%.
Stocks fell sharply in Asia overnight as concerns about economic growth and the new covid variant mounted. China’s CSI 300 dropped 1.02% and Tokyo’s Nikkei 225 fell 0.88%.
It was a similar story in Europe on Thursday, with the continent-wide Stoxx 600 down 1.19% and London’s FTSE 100 1.34% lower.
Bond yields, which move inversely to prices, fell around the world. In the US, the yield on the key 10-year US Treasury note slipped 6.1 basis points to 1.260% in European trading, putting it on track for its eighth straight decline and around its lowest since February.
Investors have become more cautious in recent weeks as signs have emerged that global growth may be slightly softer than anticipated as countries continue to battle coronavirus.
Meanwhile, rapid growth and strong inflation in the US has sparked concerns that the Federal Reserve may cut back on support sooner than initially expected.
Analysts were divided over the moves in the bond market. Some said it showed investors were concerned about the impact of the rapidly spreading delta COVID-19 variant on countries’ economic recoveries. Bonds are seen as safe-haven investments and typically rise on bad economic news.
Commerzbank FX analyst Thu Lan Nguyen had a different explanation, saying: “Since the last [Federal Reserve] meeting, concerns about the US central bank possibly reacting too late to inflation risks, thus allowing these to get out of hand, have abated.” Bond yields tend to fall along with inflation expectations.
The dollar index remained relatively strong despite the fall in US bond yields. It slipped 0.08% to 92.58, but that was well above the sub-90 reading seen just over two months earlier.
Michael Brown, analyst at currency firm Caxton, said foreign exchange traders appeared to be more focused on what central banks were doing than on longer-dated bond yields.
Minutes from the Fed’s were released on Wednesday and showed policymakers may start cutting back on their support for the economy sooner than initially planned, thanks to rapid US growth.
But the minutes showed other officials disagreed with this stance and preferred caution. The divide kept investors guessing about the most likely course of action.
Elsewhere in markets, bitcoin tumbled 5.9% as it the general risk-off feeling hit the world’s biggest cryptocurrency.
Oil prices also fell sharply, with Brent crude down 1.31% to $72.47 a barrel and WTI crude 1.61% lower at $71.04 a barrel.