4 Minute Read by TOKYO/LONDON (Reuters) – Concerns about the Delta variation of COVID-19 countered good sentiment from increasing euro zone business activity and a solid U.S. jobs report on Monday, as world equities clung to record highs. A guy stands outside a brokerage in a business sector in Tokyo, Japan, on June 21, 2021, watching an electric display showing the Nikkei index. Kim Kyung-Hoon/Reuters After statistics showed euro zone businesses expanded activity at the quickest rate in 15 years in June, the STOXX index of 600 prominent European companies was flat, rebounding earlier losses. British services firms also experienced a surge in activity in June, albeit at a much slower pace. French stocks fell 0.4 percent as Health Minister Olivier Veran warned that the highly transmissible Delta type might lead to a fourth wave of the pandemic in France. COVID-19 fears also weighed on Japanese stocks, with the Nikkei dropping 0.6 percent to a two-week low after a spike of infections in Tokyo just weeks before the Olympics. Outside of Japan, MSCI’s broadest index of Asia-Pacific stocks was unchanged. China’s blue chip stock index recovered from earlier losses to close 0.1 percent higher, as pledges from Beijing to maintain policy support for the country’s tech sector helped calm fears of a crackdown on Didi Global, the country’s largest ride-hailing company, and scrutiny of other platform companies. Last week, the MSCI All Country World index hit a new high of 724.66, and it was up 0.1 percent on Monday. With US markets off for the long Fourth of July weekend, trading was lighter than usual. “Markets are still struggling to recover their footing,” Aberdeen Standard Investments investment director James Athey said. “Of course, stocks continue to shrug off or ignore anything slightly unfavorable as they continue their happy and comfortable dance toward an unavoidable denouement.” After closing 0.8 percent higher at a record on Friday, S&P 500 futures pointed to a 0.1 percent drop for Tuesday’s beginning. The Dow Jones Industrial Average increased by 0.4 percent, while the Nasdaq Composite increased by 0.8 percent to set a new high. [.N] Last month, non-farm payrolls in the United States climbed by an unexpected 850,000 jobs, according to figures released on Friday. However, the unemployment rate unexpectedly increased to 5.9% from 5.8%, and the highly monitored average hourly earnings, a barometer of wage inflation, gained 0.3 percent last month, somewhat less than the consensus prediction of 0.4 percent. In a client note, Tapas Strickland, an analyst at National Australia Bank, stated, “The goldilocks print suggests there is no need to accelerate the tapering timeframe or the anticipated rate hike profile.” “Overall, payrolls are still 6.8 million below pre-pandemic February 2020 levels, falling short of the Fed’s requirement for significant progress. As a result, there is nothing in this report that should cause the Fed to become more hawkish.” The minutes of the Federal Open Markets Committee meeting from last month will be closely scrutinized, as policymakers startled markets by announcing two rate hikes by the end of 2023. Since then, Fed officials’ comments have been more balanced, particularly from Chair Jerome Powell, and investors are looking for more hints on the timing of policy tightening in Wednesday’s release. Euro zone government bond yields rose a smidgeon, but analysts expect the recent downward trend to continue following the release of US payrolls statistics. The yield on Germany’s 10-year Bund increased by half a percentage point to -0.231 percent. The dollar remained fairly unchanged on Monday, after falling from a three-month high at the end of last week, weighed down by the weaker specifics of the US payrolls report. The dollar rose 0.2 percent to $1.1859 per euro, while the yen remained unchanged at 111.05 yen. The price of gold rose 0.3 percent to $1,792.30 per ounce. As the OPEC+ discussions went on, crude oil remained rangebound. Saudi Arabia’s energy minister fought back on Sunday against the United Arab Emirates’ opposition to an OPEC+ pact, calling for “compromise and rationality” when the group reconvenes on Monday. Brent crude rose 0.1 percent to $76.21 a barrel, while US crude rose 0.1 percent to $75.25. [O/R] Sam Holmes and Angus MacSwan edited the piece./n
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