Europe’s share markets have spluttered and government bond yields burrowed lower after the head of the US Federal Reserve dampened taper talk and traders struggled with the rapid global rise in COVID-19 Delta variant cases.
There was a giant helping of Chinese data, including a slightly below consensus second quarter GDP reading, to digest too as well as plenty more earnings numbers to come.
China’s data is hardly dismal – average growth actually surpassed Q1 while June retail sales and industrial output beat expectations. But it does show authorities, who only last week squirted one trillion yuan into the financial system, will ensure conditions stay loose.
But markets’ delight after Jerome Powell told Congress he saw no need to rush the shift towards tighter post-pandemic monetary policy, had not lasted long.
A 0.7 per cent rise in Chinese shares on Thursday was offset as Japan’s Nikkei fell more than one per cent and London, Paris, Frankfurt and Wall Street futures all shuffled 0.1 per cent-0.8 per cent lower in early European moves.
The main all-world indices were also off their recent record highs, tempered possibly by rising COVID-19 cases around the globe and signs the post-pandemic bounce in company earnings may also be hitting a peak.
“The market is fearing the Delta variant could take a hold of different economies so you are almost seeing that we are back to the ‘bond yields lower, tech doing well’ scenario,” said Justin Onuekwusi, portfolio manager at Legal & General Investment Management.
The likes of Amazon and Google are up six per cent to eight per cent this month, while China’s biggest tech firms Alibaba and Tencent have surged more than 12 per cent since China’s central bank made a supportive tweak for the first time in nearly a year on Friday.
Traders were also waiting to see if the second day of Fed chair Powell’s testimony to the US Congress would provide any more signals.
Bond yields dipped globally, with the 10-year US Treasuries yield slipping to 1.334 per cent, having peaked out at 1.423 per cent on Wednesday.
The yield on inflation-protected bonds, sometimes called the real yield, dropped to minus 1.027 per cent, near its lowest levels since February.
In the currency market, Powell’s dovish stance put a minor dent on the US dollar.
The euro bounced back to $US1.1845 from Wednesday’s three-month low of $US1.1772. The dollar stood at 109.73 yen after a 0.6 per cent fall on Wednesday.
The Chinese yuan dipped to 6.4628 per dollar in Asia after hitting a three-week high of 6.4508 overnight.
Gold jumped to a one-month high of $US1,829.8 per ounce on Wednesday and last stood at $US1,827.9.
Brent futures lost 0.7 per cent to $US74.27 per barrel. US crude futures dropped away from this month’s seven-year high to $US72.56 per barrel.