Europe stocks drop with futures, dollar advances

Bloomberg

European stocks dropped with US futures on Wednesday as risks from a highly infectious coronavirus strain appeared to outweigh growing confidence in the global economic recovery.
The Stoxx Europe 600 Index declined 0.7%, with cyclical shares bearing the brunt of the losses. Airlines struggled as fears of the more contagious Delta variant continue to spur tourism curbs in the region. S&P 500 futures turned lower following another record close for the gauge. Japan and Hong Kong led modest losses in Asia.
The dollar rises together with Treasuries as traders digested the latest Fed comments. On asset purchases, Thomas Barkin said he wants to see much more US labour market progress before slowing them, while Christopher Waller said economic performance warrants thinking about pulling back on some stimulus. Bitcoin edged lower to trade around $35,000.
Wednesday’s bearish mood comes in the wake of data from the US and Europe showing surging confidence in the economic recovery. That suggests markets remain finely balanced between hopes for an imminent return to normal and fears that runaway inflation or coronavirus (Covid-19) variants could derail the rebound.
“The environment in Q3 should still be supportive for risky assets, though fear of bouts of persistent inflation could alter this scenario,” Sebastien Galy, senior macro strategist at Nordea Investment Funds SA, wrote in a note. “We expect to see bouts of volatility from this.”
Meanwhile, China’s President Xi Jinping will deliver a speech as the nation marks the 100th anniversary of the founding of the Chinese Communist Party on Thursday.
The Stoxx Europe 600 falls 0.8% as of 9:49 am London time and futures on the S&P 500 also declined by 0.2%.
While futures on the Nasdaq 100 were little changed, futures on the Dow Jones Industrial Average fall 0.3% and the MSCI Asia Pacific Index drop 0.1%. The MSCI Emerging Markets Index also sinks by 0.1%.
The Bloomberg Dollar Spot Index was little changed and the euro was little changed at $1.1889.
While the Japanese yen was little changed at 110.48 per dollar, the offshore yuan was little changed at 6.4678 per dollar and the British pound was little changed at $1.3831.
The yield on 10-year Treasuries was little changed at 1.46% and Germany’s 10-year yield declined two basis points to -0.18%. Britain’s 10-year yield declined two basis points to as much as 0.72%.
Brent crude was little changed and spot gold falls 0.3% to $1,756.51 an ounce.