Concerns regarding the pace of the post-pandemic recovery led to a decline in global equities and a retreat in the U.S. dollar on 8 September. Investor anxiety was fueled by a combination of rising Delta-variant infections and a disappointing U.S. employment report released three days prior, which showed August payrolls increasing by only 235,000—the lowest gain since January and significantly less than a third of projected figures.
The Nasdaq Composite was hit hardest, falling 0.57% to 15,286.68, with technology, energy, and materials shares leading the downturn. The S&P 500 decreased by 0.13% and the Dow Jones Industrial Average closed at 35,029.19, a 0.2% drop. Michael Purves, CEO of Tallbacken Capital Advisors in New York, noted that the “fiscal sugar-rush” has ended and the virus is impacting the market. He added that after seven months of gains, lopsided positioning made it easy to trigger a “de-risk” move, stating that his firm is modestly underweight in equities for the first time since April.
European Markets and ECB Uncertainty
In Europe, the Stoxx 600 experienced its steepest one-day decline since 18 August, shedding 1.2%. Germany’s DAX fell 1.5%.
These moves come as traders await the European Central Bank’s policy decision on 9 September. While some northern European policymakers advocate for winding down the €1.85 trillion Pandemic Emergency Purchase Programme this quarter, rising Covid cases in the Netherlands and Germany complicate the decision. ING rates strategist Antoine Bouvet suggested that if President Christine Lagarde resists taper talk, the euro may face pressure and peripheral spreads could tighten.
Currency, Bonds, and Commodities
The dollar index slipped 0.1% after reaching a one-week high. Meanwhile, the Australian dollar and sterling both rose 0.2%.
In the bond market, 10-year Treasury yields declined following the Federal Reserve’s Beige Book survey and a well-bid auction. Futures markets now price the probability of a November taper announcement at below 70%, a drop from the near-certainty expected the previous week. Energy prices rose as Hurricane Ida’s impact on Gulf of Mexico production persists, with roughly three-quarters of shut-down production still being restored.
Brent crude rose 1.3% to $72.60 a barrel, and West Texas Intermediate climbed 1.4% to $69.30. Gold prices dipped 0.3% to $1,792 an ounce.
In the currency market, the euro touched $1.1826.
Asia-Pacific and Digital Assets
Risk-off sentiment extended to Asia, where the MSCI Asia-Pacific gauge (excluding Japan) fell 0.71%, ending an eight-session winning streak. While the Nikkei rose 0.3% due to a weaker yen, markets in Hong Kong, Seoul, and Sydney all closed lower.
Bitcoin fell 1.6% to approximately $46,000 following technical issues with El Salvador’s nationwide cryptocurrency rollout. Additionally, Coinbase Global Inc dropped over 3% amid SEC threats of a lawsuit regarding a planned lending product. Despite the volatility, the S&P 500 remains up 19% year-to-date.
However, rising hospitalizations in southern U.S. states—returning to January levels—raise fears of slower hiring in the service sector. Market participants are now focused on the ECB’s announcement and next week’s U.S. consumer-price update to determine if the stimulus withdrawal will be cautious or hawkish.
