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European equities plunged on Thursday’s opening, with commodities also under severe pressure amid mounting concerns over US monetary policy and the re-spread of the coronavirus.
Major exchanges in the region plunged in early trading, with London’s FTSE 100 falling about 2 percent. The broad Europe Stoxx 600 fell by 1.4 percent, the Dax in Frankfurt by 1.3 percent and the Cac 40 in Paris by 1.8 percent.
Traders also exited other risky asset classes, causing oil and industrial metals prices to drop significantly. Copper, the world’s most important industrial metal, fell 2 percent to a five-month low below $9,000 a ton.
The bleak trading session, which followed a 1 percent drop in the U.S. S&P 500 overnight, came after minutes of Federal Reserve policy in July indicated a majority of policymakers were willing to change this later. year to start with the easing of the massive stimulus programs of the central bank.
The Fed’s $120 billion a month in asset purchases has been a key pillar in a global market rally from the depths of the coronavirus crisis in March 2020. However, with the US job market improving rapidly and inflation soaring, central bankers are now plans to withdraw from the extraordinary measures.
“One of the factors driving the markets throughout the year is undoubtedly the $120 billion per month,” said Fahad Kamal, chief investment officer at Kleinwort Hambros, the private banking division of Société Générale. “Obviously people are concerned as the tapering gets closer.”
Indications that the Fed will begin to taper quantitative easing came amid mounting concerns about a slowdown in growth in China, the world’s largest consumer of commodities, as the coronavirus spreads across the Asian region and creates bottlenecks in supply hinder production in key sectors. Concerns over dwindling demand in China led to a decline in mining stocks, with Rio Tinto and Glencore both falling more than 3 percent.
Concerns over the Delta coronavirus variant have also been heightened by a new study published Thursday, which found that the protection afforded by the BioNTech/Pfizer injection declined faster than the Oxford/AstraZeneca shot. Shares of airlines, including British Airways parent International Airlines Group and easyJet, fell amid ongoing uncertainty.
Investors have taken a more defensive stance in recent weeks, data tracking flows to exchange traded funds show. Global equity markets have posted significant gains this year, with the broad MSCI All-World barometer rising about 12 percent.
However, some fund managers are concerned about how much further markets will rise, especially after a blockbuster corporate earnings season set the bar high for the remainder of 2021.
Asian markets, which suffered a sharp sell-off earlier in the week on weaker-than-expected data from China, also fell. The Hang Seng lost 2.5 percent. There were significant losses at several pharmaceutical companies, including CSPC Pharmaceutical Group, WuXi Biologics and Sino Biopharmaceutical, as concerns persisted about the efficacy of Covid vaccines manufactured in China.
Outbreaks of the Delta variant in Southeast Asia, coupled with problems with the delivery of microchips, caused Toyota to cut its global production for September by 40 percent from its previous plan.
The dollar strengthened significantly in morning trading. The pound fell 0.4 percent against the dollar to $1.37, while the euro fell 0.1 percent to $1.1729.
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