Wall Street sank and European stocks suffered their worst one-day rout. This is on uncertainty over the pace of economic recovery. Because, the dollar pared gains following dovish remarks from a Federal Reserve official. Accommodative central bank policies have pushed equities to record levels. But the Delta variant is increasing the concern.
The Dow Jones Industrial Average fell 0.2% and the S&P 500 lost 0.13% to 4,514, with materials, energy and technology sectors leading the declines. The Nasdaq Composite dropped 0.57% to 15,286.68. The U.S. economy has created fewest jobs in seven months, and is now wondering how the U.S. central bank will respond to that. The New York Fed Bank President said that the central bank’s decision on tapering is not indicative of timing for lifting rates. St. Louis Fed Bank President’s comments about the tapering plan should move forward despite the slowdown in job growth.
Eddie Cheng, head of international multi-asset portfolio management at Wells Fargo Asset Management said that everything is tapering and they are looking at every single central bank, that when is the next one. MSCI’s world equity index fell 0.42%. The European stocks also dropped to their lowest in nearly three weeks. Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia said that September is the month, in which the investors confront reality. A Fed report showed that the U.S. economy downshifted slightly in August. Sebastien Galy, senior macro strategist at Nordea Asset Management, said earlier in the session that ahead of them is a continued but temporary deceleration of economic activity.
The European Central Bank will this week begin to scale back its bond purchase program. Longer-dated U.S. government bond yields fell and touched a session low after a strong auction by the Treasury of 10-year notes and the Fed’s Beige Book of economic activity. Deutsche Bank analysts gave a note that fears that central banks might start to taper their asset purchases seems to have knocked away a little confidence. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.71%. Brent settled up 1.3% at $72.60 a barrel and U.S. West Texas Intermediate (WTI) crude settled up 1.4% at$69.30 a barrel. This is with prices supported by a slow restart to production in the Gulf of Mexico after Hurricane Ida hit the region.