Stocks and futures tumble on Fed caution, virus fears

Bloomberg

Stocks in Europe and Asia tumbled with US equity futures on Thursday after the Federal Reserve painted a long slog ahead for the economic recovery and as coronavirus infection rates jumped in parts of America.
The Stoxx Europe 600 Index opened sharply lower, with sectors scooped up in the recent rally such as banks and travel leading declines. S&P 500 contracts extended their losses to about 2% after Fed Chairman Jerome Powell suggested the pandemic could inflict long-lasting damage on the economy, and amid concern that a fresh wave of infections was emerging as US lockdowns ease. Treasuries continued higher while the dollar rebounded from Wednesday losses.
“This is the first time we’ve had a little bit of negative newsflow recently” on developments in the coronavirus, Dean Turner, economist at UBS Global Wealth Management, told Bloomberg TV. “Put that in the context of how far markets have come in the last few weeks, it’s not at all surprising that we get a little bit of profit-taking at this stage.”
Stocks are catching their breath after a strong rally from March lows as investors weigh a rocky road to recovery from the pandemic against promised stimulus measures. US cases now top 2 million, with fears of a second wave emerging in Texas and Florida. Treasury Secretary Steve Mnuchin said that the US “definitely” needs additional fiscal stimulus, supporting prospects for another round this summer.
Investors are digesting the Fed’s decision to leave its policy settings unchanged while pledging to keep buying bonds. Powell said the central bank had a briefing on yield-curve control, amid expectations from some economists that the central bank will follow Australia’s and Japan’s in adopting such
a tool.
Elsewhere, Japanese and Australia benchmarks led a broad decline among Asia equity markets. Crude oil declined while gold held onto most of Wednesday’s gain.
Futures on the S&P 500 Index dropped 1.7% as of 9:21 am London time and the Stoxx Europe 600 Index sank 2.4%.
While the MSCI Asia Pacific Index decreased 1.8%, the MSCI Emerging Market Index decreased 1.1%.
The Bloomberg Dollar Spot Index jumped 0.4%, the euro was little changed at $1.1372 and the British pound sank 0.4% to $1.269. While the onshore yuan weakened 0.1% to 7.072 per dollar, the Japanese yen strengthened 0.1% to 106.97 per dollar.
The yield on 10-year Treasuries fell two basis points to 0.70% and the yield on two-year Treasuries climbed one basis point to 0.17%. Germany’s 10-year yield decreased four basis points to -0.38%.
While Britain’s 10-year yield fell four basis points to 0.231%, Japan’s 10-year yield dipped one basis point to 0.011%.
As West Texas Intermediate crude declined 3.8% to $38.10 a barrel, Brent crude dipped 3.4% to $40.32 a barrel and gold weakened 0.3% to $1,733.77 an ounce.