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Global Markets Wobble on Slowdown Fears, Fed Taper Worries

Stocks in Europe slide and Wall Street ends mixed on Thursday. Friday futures drop, European bourses lower on the day.

SageFX - Aug, 20, 21

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Principal Points

  • Stocks in Europe slide and Wall Street ends mixed on Thursday
  • Friday futures drop, European bourses lower on the day

Stocks on Wall Street barely managed to close mostly higher on Thursday, while European markets slipped about 1.5%. Increased uncertainty overshadowed the positive growth outlook a day after the Federal Reserve made the historical announcement it is preparing to tighten its loose monetary policies this year.

Wall Street’s S&P500 erased a 1% slide by the time the market session closed, while the Dow Jones couldn’t gather enough buying momentum and closed lower on the day. The broad-based S&P500 added just 5 points, or about 0.1%, while the blue-chip Dow closed down 66.57 points, after sliding more than 400 points earlier in the day.

Market participants took the opportunity to buy into equities at a slight discount after valuations were knocked a day earlier when the Fed’s minutes said policymakers are considering reducing their vast stimulus of $120bn in monthly asset purchases by the end of the year.

While Wall Street managed to swing back near the flat line, European bourses had their biggest daily drop in a month. The pan-European Stoxx 600 tumbled 1.51%, dragged lower by mining stocks and companies from the luxury sector. The broad-based index reached a two-week low, closing the session at 467.24.

Ether Trades in the Green

Uncertainty over China’s plans to target excessive corporate profits weighed on companies with sizeable exposure to China’s economy. Shares of LVMH dropped 6.38%, while Richemont and Kering slumped 4.75%, and 9.47%, respectively.

Concerns have also elevated over whether the global economy has peaked against the backdrop of increasing Covid-19 cases. The quick spread of the Delta variant in Asia has dented supply-chain processes, dampening the growth sentiment.

Commodity prices, an indicator of global expansion, extended their decline on Thursday as investors decreased their risk appetite. Gold has been trading muted this week near the $1,785 threshold, while oil prices continued their descent for a sixth straight session on Thursday.

Copper, one of the leading industrial metals, fell 2% yesterday, reaching a five-month low below $9,000 a ton.

In contrast, earlier in the week, stocks on Wall Street hovered at all-time highs, while the Stoxx Europe 600 was on a tear in a 10-day winning rally.

On Friday, traders and investors seem to have taken a more defensive posture. Markets across Europe are modestly lower, poised to extend their decline.

Futures contracts tied to the major averages in the US turned sharply negative. Pre-market trading activity points to a loss of about 200 points for the Dow Jones Industrial Average at the opening. Futures on the S&P500 are down about 25 points, while Nasdaq Composite futures are lower by roughly 65 points.

The cryptocurrency market today is pushing to the upside. Bitcoin is higher by over 1.5%, extending yesterday’s gains of about 6%. The leading digital asset snapped a three-day losing streak on Thursday and is currently trading near $47,000 per coin.

Bitcoin has been consolidated between the $43,000 and $48,000 for over a week as crypto market participants are undecided where to take the price. Ether is also in the green today, trading above $3,200 per token, up about 2.2% on the day.