Global Stocks Mixed as Delta Overshadows Broad Economic Recovery

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Principal Points

• Stocks around the world digest a rich mix of positive and negative developments
• Despite challenges, major equity gauges are set for a seventh monthly advance

Global stocks are experiencing renewed jitters due to the mix between Delta virus concerns, Jerome Powell-inspired rally, surging inflation, and geopolitical tensions. All these factors are panning out differently for stocks in Asia, Europe, and the US.

Asian stocks fell broadly on Tuesday as weaker economic activity in China weighed on the market sentiment. Furthermore, Beijing’s crackdown on large-scale private companies continues to escalate, threatening to hinder growth in private industries.

China stocks were pressured on Tuesday by an outbreak of the Delta strain of the coronavirus. Rising cases and imposed restrictions have led to a slump in the services sector for the first time since February last year.

US futures contracts today continued to look upward after a record-breaking session on Monday took the S&P500 to its 12th all-time high in August, and 53rd record close for the year. Nasdaq futures were higher by around 0.4% on Tuesday, while S&P500 futures climbed 0.3%. Futures on the Dow Jones Industrial Average advanced about 0.3%.

After Federal Reserve Chairman Jerome Powell assuaged investors’ fears, technology companies have performed remarkably well. Mr. Powell restated that Fed officials will not rush to raise interest rates after a reduction in stimulus expected this year. He also eased inflation concerns by saying higher prices would most likely fade over the next months.

European Markets Remain Relatively Unchanged

The Nasdaq Composite surged to a new record high on Monday. The tech-centred index gained 0.9% to 15,265.89. Big tech stocks were among the leaders in yesterday’s rally as Apple added more than 3%. Shares of Facebook, Tesla, and Amazon sprinted 2% or more.

The more contagious variant of the Covid-19 pressured economically sensitive stocks on Monday. The Dow Jones Industrial Average slipped 0.16%, dragged lower by banks, travel, and leisure, and oil stocks.

A sharp rise in confirmed daily cases saw the US reporting as much as 280,403 new infections yesterday, almost reaching the peak of 300,777 set January 8.

On that note, in another blow to the tourism industry, European countries are considering reinstating restrictions on US travellers as colder months approach. The US rate of infection has surged to more than 300 new Covid-19 cases per 100,000 in the past 14 days. EU Covid standards consider a safe rate of infection to be no more than 75.

European markets on Tuesday fare relatively unchanged and hugging the flat line following a largely muted market session from a day earlier. On Monday, the region-wide Stoxx 600 was barely changed as it ended the day higher by 0.07% to 472.68.

Stock averages across Europe traded mostly higher with Germany’s DAX in the lead, gaining 0.22%. UK’s markets were taking a break due to the summer bank holiday. France’s CAC40 added 0.08%, while Spain’s IBEX35 declined 0.61% on the day.

German inflation data, in the meantime, has increased concerns that higher prices might slow down the economic recovery in the eurozone. Germany’s harmonized index of consumer prices rose to 3.4% in August on an annual basis, the highest level since 2008.

The European Central Bank’s governing council will gather next week to continue discussions whether the ECB should dial back its monetary stimulus to prevent major economies in the bloc from overheating.

Despite recent challenges, global stocks are set for a seventh consecutive month of gains, underpinned by strong earnings reports, extraordinary monetary support, vaccine-fueled recovery expectations, and broader economic reopening.

In cryptocurrencies, bitcoin fell this morning to about $47,000 per token following a slightly negative performance from a day earlier.