Stocks, Futures Sink on Virus, Manchin Shock: Markets Wrap

Stocks, Futures Sink on Virus, Manchin Shock: Markets Wrap

(Bloomberg) — Investor sentiment sagged Monday amid rising global omicron infections and turmoil for President Joe Biden’s economic agenda, spurring selloffs in stocks, equity futures and oil, while bolstering sovereign bonds.

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Stocks, Futures Sink on Virus, Manchin Shock: Markets Wrap

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Europe’s Stoxx 600 Index dropped more than 2%, while U.S. futures slid at least 1% and MSCI Inc.’s gauge of Asia-Pacific equities was set for its worst drop since March. Treasuries led global bonds gains and the dollar held a jump from Friday.

Fresh restrictions in parts of Europe to stem the rapid spread of omicron are rattling investors. Rising cases led the Netherlands to return to lockdown, while U.K. Health Secretary Sajid Javid refused to rule out stronger measures before Christmas. U.S. lockdowns likely won’t be necessary but hospitals may be strained, Biden’s top medical adviser Anthony Fauci said.

Separately, Goldman Sachs Group Inc. economists reduced their U.S. economic growth forecasts after Senator Joe Manchin blindsided the White House on Sunday by rejecting Biden’s roughly $2 trillion tax-and-spending package, leaving Democrats with few options for reviving it.

Crude oil slid on worries that mobility curbs to tackle the strain will hurt demand. Commodity-linked currencies struggled, while the lira tumbled to another record low after Turkish President Recep Tayyip Erdogan pledged to continue cutting interest rates.

Markets are grappling with a range of uncertainties while heading toward a holiday period when thinner trading volumes can exacerbate swings.

“Omicron remains a concern and cases are on the rise,” said Robert Schein, chief investment officer at Blanke Schein Wealth Management. “Investors should be prepared for Covid to continue to be a main factor in market performance heading into 2022. After the bull run we’ve seen over the past 21 months, investors aren’t as used to prolonged periods of volatility.”

Global stocks retreated last week in part on an outlook of diminishing central bank stimulus as officials pivot toward fighting inflation. Federal Reserve Governor Christopher Waller said a faster wind-down of the central bank’s bond-buying program puts it in a position to start lifting interest rates as early as March.

In China, banks lowered the one-year loan prime rate, a key benchmark of borrowing costs, for the first time in 20 months. But that did little to shore up risk appetite.

For more market analysis, read our MLIV blog.

What to watch this week:

Reserve Bank of Australia releases minutes of its December interest rate meeting. Tuesday

EIA crude oil inventory report Wednesday

Bank of Japan Governor Haruhiko Kuroda speaks Thursday

U.S. consumer income , new home sales, U.S. durable goods, University of Michigan consumer sentiment, initial jobless claims. Thursday

Friday: U.S. markets are closed. European markets close earlier

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 fell 2.2% as of 8:10 a.m. London time

Futures on the S&P 500 fell 1.4%

Futures on the Nasdaq 100 fell 1.4%

Futures on the Dow Jones Industrial Average fell 1.3%

The MSCI Asia Pacific Index fell 0.9%

The MSCI Emerging Markets Index fell 0.6%

Currencies

The Bloomberg Dollar Spot Index was little changed

The euro rose 0.2% to $1.1258

The Japanese yen rose 0.1% to 113.47 per dollar

The offshore yuan was little changed at 6.3883 per dollar

The British pound fell 0.3% to $1.3208

Bonds

The yield on 10-year Treasuries declined three basis points to 1.37%

Germany’s 10-year yield declined one basis point to -0.39%

Britain’s 10-year yield declined two basis points to 0.74%

Commodities

Brent crude fell 2.9% to $71.41 a barrel

Spot gold was little changed

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