WASHINGTON/LONDON (Reuters) – Euro zone bonds were on course for their best day in months on Thursday as the European Central Bank took its first tentative step in withdrawing COVID-era stimulus, and Wall Street indexes gained after weekly jobless claims data fell to a pandemic low.
The Dow Jones Industrial Average rose 41.01 points, or 0.12%, to 35,072.08, the S&P 500 gained 3.34 points, or 0.07%, to 4,517.41 and the Nasdaq Composite added 39.29 points, or 0.26%, to 15,325.93 by 11:22 a.m. EDT (1523 GMT).
The number of Americans filing new claims for jobless benefits fell to the lowest level in nearly 18 months last week, offering more evidence that job growth was being hindered by labor shortages rather than cooling demand for workers.
Europe’s STOXX 600 reversed earlier losses and banking shares climbed after the ECB signaled it will only slightly reduce its emergency bond purchases over the coming quarter, in line with expectations.[.EU]
The euro consolidated a modest 0.3% rise against the dollar, climbing for the first time in four sessions, while bond markets cheered by sending French 10-yields negative again. [GVD/EUR]
“I think it has been largely priced by the market,” said AXA Group Chief Economist Gilles Moec.
He had been waiting to see if Lagarde would hint at any potential end date for its PEPP programme, but she instead channelled the spirit of former British Prime Minister Margaret Thatcher, saying: “The lady isn’t tapering.”
Germany’s 10-year yield, the benchmark for the bloc, were set for their biggest weekly decline since July. [GVD/EUR]
CAUTION! FRAGILE CHINA
The UK’s FTSE 100 dropped nearly 1% with low-cost airline easyJet tumbling over 10% as it tapped shareholders for 1.2 billion pounds ($1.7 billion). [.EU]
MSCI’s broadest index of Asia-Pacific shares ended down 1%, which was its worst daily performance since Aug. 19, the last time markets decided they were worried about the U.S. Federal Reserve tapering its massive asset purchase programme.
Chinese tech giants Tencent, NetEase and Alibaba had slumped 8.5%, 11% and 6% respectively after online gaming chiefs were summoned by authorities to check they are sticking to strict new rules for the sector.
“The global story is looking soft and it’s being hit by the Delta variant plus concern about potentially the Fed still moving towards a taper,” said Rob Carnell, Asia head of research at ING. “It’s an unsettling combination of things.”
The China angst had meant Hong Kong, where many heavyweight Chinese firms are also listed, shed 2.3%.
News that Chinese authorities had told gaming firms to resolutely curb incorrect tendencies such as focusing “only on money” and “only on traffic” had hurt companies with large gaming operations. Tencent fell 8.5%, Bilibili lost nearly 9% and NetEase slumped 11%.
There was more turbulence too for the country’s most indebted property giant, Evergrande.
Media reports the company would suspend some interest payments on loans and payments to its wealth management products sent its shares down more than 10% at one point, although they recovered almost half of the drop on news that some creditors had agreed to loan payment extensions.
Korea’s Kopsi fell 1.5%, also under pressure from regulatory scrutiny of local tech players. In Korea’s case, fintech names such as Kakao Corp , which sank 7.2%, and Naver Corp, down 6.9%, were in the spotlight.
Australian stocks lost nearly 2% after payrolls data showed a sharp drop in jobs in the first half of August.
It was calmer in the commodities markets. Oil prices rose as production in the U.S. Gulf of Mexico was slow to come back on line following Hurricane Ida, while aluminium hit a 13-year high, partly in response to a coup in Guinea, one of the world’s top bauxite producers.
“Political unrest in Guinea has significantly raised the risk of disruption. At the same time, power shortages and environmental measures are restricting output in China,” ANZ analysts said in a note.
($1 = 0.7246 pounds)
Evergrande’s bonds slump on default worries
Additional reporting by Alun John in Hong Kong; Editing by Jane Merriman, Mark Potter and Carmel Crimmins