Global stocks sink after the Fed signals a bond-buying pullback this year, while oil slides for a 6th day
Johannes EISELE /AFP/Getty Images
- Global stocks slid Thursday after Fed minutes showed officials agree a pullback in bond-buying is possible within months.
- Asian and European equities tracked US stocks lower, as anxiety about the Delta variant and economic recovery persisted.
- Oil prices dropped for a sixth day, leaving West Texas Intermediate prices 14% lower from a month ago.
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Global stocks traded sharply lower on Thursday, as investors already worrying about a slowing in post-pandemic economic recovery had their fears about a potential Federal Reserve taper confirmed.
US stock futures linked to the Dow Jones Industrial Average, the S&P 500, and the Nasdaq fell between 0.4% and 0.6% as of 6:25 a.m. ET, suggesting a lower start to trading later in the day.
Minutes from the Fed's July meeting, which showed most policymakers back a wind-down in asset purchases before the end of 2021, prompted a selloff in US equities Wednesday. The S&P 500 lost 1.07% by the session's close. The Dow ended 382 points lower for a 1.08% loss, while the Nasdaq shed 0.89%.
US Treasury yields fell Thursday, with the benchmark 10-year note hovering around 1.23% after hitting a session high of 1.30%, or 3 basis points higher, before the release of the minutes.
The US dollar index on Thursday rose 0.3% to 93.44, its highest level since November 2020. A stronger dollar dragged on gold, leaving the metal 0.2% lower at $1,782 an ounce.
In the monthly meeting, Fed officials wanted to emphasize that their decisions on tapering and hiking interest rates would be separate and not depend on the other course of action, Deutsche Bank strategists said.
Still, the Federal Open Market Committee members remained divided on the timing of when to end central bank support.
"The Fed is scaling back because it is independent, and the motive for buying bonds was to supply needed liquidity," Paul Donovan, chief economist at UBS Global Wealth Management, said in a Thursday note. "That liquidity is less needed, so bond-buying is less needed."
Investors will now watch for Fed Chair Jerome Powell's speech at the Jackson Hole annual symposium next week for fresh clues to the central bank's moves.
The Fed news piled on the pressure for markets already anxious about an economic slowdown driven by the Delta coronavirus variant's spread. COVID-19 cases in New Zealand climbed to 21.
Oil sold off for a sixth consecutive day as investors fretted about the impact of COVID-19 on fuel demand. Brent Crude dropped 3% to $66.12 a barrel on Thursday, and West Texas Intermediate moved 3.5% lower to $62.86 a barrel. The move came despite Energy Information Administration figures on Wednesday that showed US crude-oil stockpiles fell to their lowest since January 2020.
European equities slid, tracking US markets lower, as Italy reported 7,000 new COVID cases. London's FTSE 100 was down 1.8%, the Euro Stoxx 50 slipped 1.8%, and Frankfurt's DAX lost 1.5%.
A commodity slump dragged mining and oil company stocks lower. Anglo American's stock fell 10%, while Rio Tinto and BP each lost over 4%.
Asian equities took a lead from the US. Concerns about Beijing's regulatory interventions and an uncertain IPO environment in China cast a "dark cloud" over stock prices, Oanda senior analyst Jeffrey Halley said.
Tokyo's Nikkei shed 1.1%, Hong Kong's Hang Seng lost 2.2%, and the Shanghai Composite was down 0.5%.
"Chinese equity prices will fall to levels that offset the multitude of governmental risks they now face," Halley said.
Alibaba's Hong Kong shares fell 4.8% to a record low. Gaming giant Tencent dropped 3.4% after warning further regulations for China's tech sector are likely, and Alibaba's Hong Kong shares were down 4.8% to a record low.
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