The selloff among global stocks continued on Friday, with equities down in Asia and Europe and futures indicating a weak open in the U.S., as investors’ concerns continue to center on monetary policy and the pandemic’s impact on global growth.
Futures for the Dow Jones Industrial Average were pointing down around 160 points, set for another weak open after the index has tumbled more than 650 points in the last five days. Futures for the S&P 500 and Nasdaq were indicating a similarly negative start to the last trading day of a brutal week.
The forces behind recent weakness remain largely unchanged. A rise in worldwide cases of Covid-19, driven by the more contagious Delta variant of coronavirus, threatens the buoyant narrative of global growth that has injected strength into markets this year.
Meanwhile, investors’ continue to read into messages from the U.S. Federal Reserve for hints on future monetary policy. The latest hint came in the July meeting minutes of the Federal Open Market Committee. These minutes suggested that the central bank could begin slowing its massive monthly asset purchases—a pandemic-era measure to add liquidity to financial markets—as soon as this year.
“The Delta variant remains the biggest worry for investors right now, and along with the question of waning vaccine efficacy has made the risks to the outlook much more pronounced relative to just a few months ago,” said Henry Allen, an analyst at Deutsche Bank.
“However, nervousness about possible tapering by the Fed ahead of next week’s Jackson Hole speech by Chair Powell, along with a potential Chinese growth slowdown have further played on investors’ minds, and brought the narrative a long way from the reflation hopes many had back in Q1,” Allen added.
Analysts noted that the yield on the 10-year U.S. Treasury note has slipped more than 12 basis points since last Thursday, indicating that markets may be more concerned about slowing global economic growth than Fed policy.
In Asia, Tokyo’s Nikkei 225 declined 0.98% while the Hong Kong Hang Seng slipped 1.8%, slipping into a bear market, and the Shanghai Composite fell 1.1%. In Europe, London’s FTSE 100 was down 0.2% as the pan-European Stoxx 600 was 0.2% lower. Paris’ CAC 40 moved 0.3% into the red as Germany’s DAX dipped 0.4%.
“Asia markets continue the weakness of the last 24 hours with Japanese auto makers getting clobbered on the back of Toyota’s decision to cut car production in September,” said Michael Hewson, an analyst at broker CMC Markets.
Chinese stocks were also weakened by tough new online privacy laws, adding on to regulatory pressures for the country’s embattled tech sector. Shares in Alibaba fell near 3% in Hong Kong.
“As we look to today’s European session we’ll also get the opportunity to run the rule over the U.K. economy with the latest retail sales numbers and public finance data for July,” Hewson said.
A basket of British retail sales figures for last month disappointed across the board, missing expectations as total volumes slumped 2.5% between June and July.
It’s a lighter day on the U.S. economic front, where the highlight will be remarks from Dallas Fed President Rob Kaplan.
On a similarly thin day for corporate earnings, results are due from Deere and Foot Locker.
Write to Jack Denton at jack.denton@dowjones.com
