LONDON/HONG KONG – Global shares stumbled on Tuesday, rattled by concerns over a worldwide spike in COVID-19 infections driven by the Delta variant.
US Treasury and German bond yields fell to the lowest in over a week ahead of the release of US retail sales data due later in the day, expected to offer further signs of slowing economic momentum.
Wall Street opened sharply lower as investors digested data showing US retail sales fell more than expected in July.
The Dow Jones Industrial Average fell 0.7 percent in early trading, while the S&P 500 lost 0.53 percent and the Nasdaq Composite dropped 0.65 percent.
In early European trade, the pan-European STOXX 600 shed 0.5 percent, its lowest level in more than a week and its second straight session of falls after its longest winning streak in over a decade.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.5 percent.
Amid signs that the world’s economic recovery is losing momentum, the continued spread of new COVID-19 variants and the impact on the global economy have also shaken market confidence.
New Zealand’s dollar slumped to a near three-week low after the country was placed under strict lockdown following the first reported case of the coronavirus in six months.
The currency was down 1.4 percent at US$0.6921, on track for its biggest daily fall since May.
Investors globally were also monitoring turmoil in Afghanistan, where thousands of civilians desperate to flee the country thronged Kabul airport after the Taliban seized the capital and declared the war against foreign and local forces over. Markets, however, have not reacted strongly so far.
The New York Federal Reserve’s Empire State barometer of manufacturing business activity fell more than expected.
“Entering the second half of 2021, we think the investor concern is shifting from inflation to growth globally,” said Wang Qi, CEO at MegaTrust Investment. “Inflation is still our top concern, but we are also worried about a potential economic slowdown.”
The market consequences of the chaos in Afghanistan for the developed world had been limited so far, Deutsche Bank analysts said in a note.
“Instead, the longer-term risk is that Afghanistan could become a haven for terrorist groups, and such attacks have historically had serious market ramifications of their own,” they noted.
The other risk of the conflict was that it complicated US President Joe Biden’s push to pass economic proposals, alongside the potential for another fight over the debt ceiling in the weeks ahead, Deutsche Bank said.
Investors are focused on when the Federal Reserve will rein in its easy money policies, with minutes from the central bank’s latest meeting due on Wednesday.
Boston Federal Reserve Bank President Eric Rosengren said on Monday that one more month of strong job gains could satisfy the US central bank’s requirements for beginning to reduce its monthly asset purchases.
The US dollar was up 0.1 percent at 92.705, after gaining in the previous session.
The Australian dollar fell to a nine-month low after the latest central bank meeting minutes showed policymakers would be prepared to take policy action should coronavirus lockdowns threaten a deeper economic setback. The currency was last down 0.7 percent on the day at US$0.72885.
In more risk-off moves, the yield on benchmark 10-year Treasury notes fell as demand for safe-haven US bonds ticked up. The yield on benchmark 10-year Treasury notes dropped to 1.25 percent compared with its US close of 1.257 percent on Monday.
Germany’s 10-year yield, the benchmark for the bloc, fell nearly 3 basis points to -0.496 percent in early trade, the lowest since Aug 6.
US crude dipped 0.6 percent to US$66.9 a barrel. Brent crude fell 0.6 percent to US$69.1 per barrel.
Gold was 0.2 percent higher. Spot gold traded at US$1,791.41 per ounce.