LONDON: U.S. index futures and European stocks weakened on Wednesday and world shares drew back from recent record peaks, as markets grew jittery about the pandemic again ahead of the half-year-end and key U.S. jobs data later this week.
Asset markets have been buoyed over the past year by trillions of dollars of monetary and fiscal stimulus by central banks and governments around the world in response to COVID-19, while vaccination roll-outs in recent months are boosting the economic outlook.
“The search for yield is a very powerful force. It doesn’t have the narrative right now to stop it,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.
But stocks trimmed some gains on the last trading day of the month and half-year, amid concerns about the more infectious coronavirus Delta variant first identified in India.
“At the end of the month there may be some re-balancing going on,” said Giuseppe Sersale, fund manager at Anthilia in Milan. “My impression is that there is a fear for the impact of the Delta variant on the summer season in Europe.”
Indonesia, Malaysia, Thailand and Australia are all battling pandemic outbreaks and tightening restrictions, and Spain and Portugal announced restrictions for unvaccinated British tourists.
U.S. S&P futures dipped 0.13per cent after buoyant overnight U.S. share trading as U.S. consumer confidence jumped to its highest level in nearly 1-1/2 years in June.
Growing labour market optimism as the economy reopens offset concerns about higher inflation.
But European stocks suffered steeper losses, falling 0.89per cent. German stocks dropped 1.4per cent and British shares fell 0.67per cent.
The European benchmark, which hit record highs this month, remains on course, however, to post its biggest first-half percentage gain since 1998.
Euro zone inflation eased in June in line with forecasts but is expected to move well above the European Central Bank’s target towards the autumn on higher commodity prices.
Germany’s 10-year government bond yield fell 2.2 basis points on the data to -0.194per cent.
MSCI’s global share index fell 0.18per cent but was set for a fifth straight month of gains, a day after hitting an all-time high, and for a rise of more than 11per cent in the first half.
EYES ON PAYROLLS
Markets are focusing on U.S. private payrolls data later on Wednesday, ahead of Friday’s release of U.S. non-farm payrolls data which could influence Federal Reserve policy.
Economists polled by Reuters forecast Wednesday’s private payrolls showing a gain of 600,000 in June, a slowdown from a month ago when 987,000 jobs were created.
For the more comprehensive labour figures on Friday, economists polled by Reuters were expecting a gain of 690,000 jobs for June, up from 559,000 in May. But the variation among the 63 estimates was large, ranging from 400,000 to more than a million.
The benchmark 10-year U.S. Treasury note yield fell more than 2 basis points to 1.4528per cent.
The dollar was headed for its best monthly rise since March, mostly in the wake of a surprisingly hawkish shift in the Fed’s rates outlook.
A “very optimistic” Fed Governor Christopher Waller on Tuesday said it may need to start dialling down its massive asset purchase programme as soon as this year to allow the option of raising interest rates by late 2022.
The dollar index rose 0.06per cent to 92.123, with the yen steady at 110.49 and the euro down 0.1per cent at US$1.1882. Sterling was up 0.17per cent at US$1.3859.
MSCI’s index tracking Asian shares outside Japan was set for a small monthly loss, but still on course for a fifth straight quarterly rise, its longest such streak since 2006-2007. The index slipped 0.05per cent.
Chinese blue chips added 0.65per cent. Japan’s Nikkei was down 0.07per cent.
Oil prices were heading for monthly and quarterly gains after some data suggested U.S. crude stockpiles were shrinking.
Brent crude rose 0.78per cent to US$75.34 per barrel and U.S. crude jumped 1per cent to US$73.93.
Spot gold lost 0.14per cent to US$1,759.36 an ounce, putting it on course for its biggest monthly drop since November 2016.
(Additional reporting by Danilo Masoni in Milan and Andrew Galbraith in Shanghai; Editing by John Stonestreet, Alex Richardson, Philippa Fletcher)
