European Bourses Drop, US Markets Finish Mixed as Rally Pauses

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Principal Points

• Global stocks pause for breath as investors take on the risk-off approach to markets
• Market participants today expect the FOMC meeting minutes release

European shares pulled back from their recent highs on Tuesday as investors across the old continent battled with increased concerns about the rebounding economic recovery. Major European markets snapped a three-day winning streak as the German DAX led the losses and finished lower by 0.96%. Spain’s IBEX35 dropped with the same percentage, while the French CAC40 declined by 0.91%. The oil-heavy FTSE100 posted its worst session in two weeks as the UK benchmark index slipped 0.89%.

The major European bourses skittered down despite a continued recovery indicated by several economic gauges. The German investor morale fell below expectations but remained on a steady climb higher. Eurozone monthly retail sales rose above expectations in May, after a slight drop in April.

The pan-European Stoxx Europe 600 declined 0.52%, or 2.38 points, to 455.98. Worries over supply chain bottlenecks and chip shortages have been weighing on the index for more than a month. On Tuesday, the worst performers were automobile shares, sliding 2.9%.

Oil prices slipped, leading the oil-and-gas sector lower by 1.8% after an OPEC+ standoff had sent them to multi-year highs. Major oil companies such as BP, Royal Dutch Shell, and Total dropped between 2% and 4%.

Improved outlook for a swift and strong economic rebound across Europe has buoyed stocks so far in the year. Presently, however, rosier growth projections appear to be on pause as the Delta strain of the coronavirus threatens to undermine recovery.

The Delta Variant Raises Concerns

The highly contagious Delta variant swept the UK and has become the main reason for concern in Portugal. It has already flared up in Germany, France, and Spain and is prompting European health officials to consider taking further action before it accelerates across the continent.

Stocks on Wall Street paused for breath yesterday. The S&P500 retreated from its record high reached on Friday and snapped its seven-day winning streak. Over the past seven trading sessions, the broad-based index closed at a new record every following day, a feast unseen since 1997.

The S&P500 declined 8.80 points, or 0.20%, to 4,343.54. The Dow Jones Industrial Average dropped 208.98 points, or 0.60%, to 34,577.37. The 30-stock index slipped more than 1% at one point during the session. The Nasdaq Composite ended in the green, higher by 24.32 points, or 0.17%. The tech-heavy index closed at a fresh record of 14,663.64. The US markets are going through a shortened week due to Monday’s break when trading was halted for the Independence Day holiday.

Wall Street stocks, similar to their European counterparts, have been ticking higher in recent months, supported by the continued fiscal and monetary injections. The US economy has been recovering at a rapid pace while the US central bank has been at the forefront, navigating the recovery pathway.

Today, investors on both sides of the Atlantic will be focused on the release of the US Federal Reserve’s minutes of its last policy meeting in mid-June. Market participants will be looking for hints on when and how the central bank intends to start dialling down its ample monetary stimulus program.

In cryptocurrency, bitcoin on Tuesday traded relatively muted, hovering around $34,000 per coin. In the early hours of Wednesday’s trading, the digital currency popped over 3% on the day to reach a session high of $34,850.