Stocks Drop After Fed Flags Risk; Treasuries Rise: Markets Wrap


(Bloomberg) — Stocks dropped in much of the world after the Federal Reserve signaled continued concern over the pandemic weighing on the world’s biggest economy. Treasuries advanced.

Declines in industrial companies including ABB Ltd. and Siemens AG led the Stoxx Europe 600 Index lower. Caution carried over from Asia, where an MSCI equities benchmark headed for its biggest drop since mid-July. S&P 500 and Nasdaq 100 futures declined, pointing to another weak session after Fed minutes of a July meeting said the virus posed “considerable risks” to the economic outlook over the medium term.

The dollar added to Wednesday’s gains against its biggest peers, while gold also edged higher. The euro slipped before the release of European Central Bank meeting minutes and policymakers’ prognosis for economic recovery.

Equities in several continents are seeing fresh weakness as investors debate whether momentum that pushed the S&P 500 to a record high this week can be sustained amid lofty valuations and uncertainties over further stimulus to counter the pandemic. Investors will see the latest weekly unemployment figures for the U.S. later on Thursday.

“There is still a fair amount of uncertainty around the path of the coronavirus, through the flu season, and what that may mean for economic growth,” Jim McDonald, chief investment strategist at Northern Trust, said on Bloomberg TV. “Stocks are somewhat expensive here — we struggle to get to a meaningful positive return on stocks over the next year just because we’ve priced in so much of a recovery already.”

U.S. Congressional leaders hinted they were looking for a path toward reviving stalled talks on the next round of pandemic relief — even as both sides remain far from a deal. Any accord is still likely to wait until September despite the fact that the U.S. economy is limping along with many businesses still struggling and millions of Americans out of work.

Elsewhere, Hong Kong stocks fell for a second session as investors remain rattled about disputes between Washington and Beijing. The U.S. suspended its extradition treaty with Hong Kong and ended reciprocal tax treatment with the former British colony.

Oil declined from a five-month high in New York with the Fed and OPEC+ sounding caution on the demand recovery.

Here are some key events coming up:

U.S. jobless claims for the week ended Aug. 15 are due Thursday.Euro-area PMIs will be released on Friday.

These are some of the main moves in markets:

Stocks

The Stoxx Europe 600 Index dipped 1.1% as of 10:29 a.m. London time.Futures on the S&P 500 Index fell 0.5%.Nasdaq 100 Index futures fell 0.4%.The MSCI Asia Pacific Index sank 1.6%.

Currencies

The Bloomberg Dollar Spot Index increased 0.1%.Sterling strengthened 0.1% to 0.9027 per euro.The Japanese yen strengthened 0.1% to 106.02 per dollar.The South Korean Won weakened 0.5% to 1,186.94 per dollar.

Bonds

The yield on 10-year Treasuries declined three basis points to 0.65%.The yield on two-year Treasuries fell one basis point to 0.13%.Britain’s 10-year yield decreased one basis point to 0.224%.Germany’s 10-year yield dipped one basis point to -0.49%.

Commodities

West Texas Intermediate crude declined 0.8% to $42.59 a barrel.Gold strengthened 0.1% to $1,931.32 an ounce.Silver strengthened 0.4% to $26.82 per ounce.LME zinc decreased 1.2% to $2,475 per metric ton.

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