Markets stabilize after worst fall in stocks in months

Investors have become concerned about the Delta coronavirus variant, which has led to a reassessment of the outlook for the economy. Despite this, the three major stock indexes only closed around 3% each from their all-time highs on Monday, underscoring the strength of the recovery that fueled stock markets in the first half of the year.

“When you get a massive sell off like the one we had yesterday, there will definitely be investors who see this as an opportunity to invest for the longer term,” said Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management. . “Especially where the 10 years [Treasury] the returns are gone, this still indicates the default position for investors as long stocks, as there are simply very few other options. ”

In bond markets, the yield on the benchmark 10-year US Treasury bond extended its decline and edged down to 1.169%, after falling to 1.181% on Monday in the largest daily decline since March. Prices go up when yields go down. The WSJ Dollar Index is close to its highest level since March.

“There isn’t a big catalyst, but it’s a combination of factors. There are questions about vaccines, we might still have restrictions on consumer behavior, mobility, it’s coming back more and more in the minds of the market, ”said James Athey, Investment Manager at Aberdeen Standard Investments. “We are also witnessing the summer lull. It’s very calm, so the volumes are lower, the liquidity is thinner.

Oil prices have also risen after falling on Monday over fears Covid-19 could once again dampen energy demand. Brent crude added 0.3%, after falling 6.8% in its worst daily performance since March. The US benchmark West Texas Intermediate also rose 0.2%, after posting its largest drop since September.

“We sometimes forget that when we’ve had periods of really strong performance and low volatility, the little bumps in the market make it look like they’re bigger than they are,” said Shaniel Ramjee, manager of multi-asset funds at Pictet Asset Management.

Profits season is underway, tobacco giant Philip Morris International and insurance company Travelers Companies are expected to report ahead of the opening bell. Netflix,

Chipotle Mexican Grill and United Airlines are expected to post profits after markets close.

In pre-market trading, IBM was up 4.3% after reporting higher revenue driven by its cloud, software and services businesses. Travel stocks also rose. Delta Air Lines and Southwest Airlines both grew 2% and Carnival rose 2.9%.

Cryptocurrencies continued their decline, with bitcoin falling below $ 30,000 on Tuesday for the first time in a month. It’s down almost 4% from its 5 p.m. ET level the previous day, to around $ 29,600.

Overseas, the pancontinental Stoxx Europe 600 rose 0.4%. Among European equities, UBS climbed 3.6% after posting better-than-expected profits for the second quarter, driven by strong client activity and growth markets. Mining giant BHP Group fell 2.5% after announcing that production would likely remain stable over the next 12 months.

Travel agencies have been among the best performers in European equities. Deutsche Lufthansa rose 3%, German travel company TUI added 4% and jet engine maker Rolls Royce rose 4.1%.

In Asia, most major benchmarks extended Monday’s declines. The Shanghai Composite Index lost another 0.1% and the Hong Kong Hang Seng fell 0.8%.

A US housing starts gauge for June is expected to be released at 8:30 a.m. ET. Economists expect the rise as prices for materials such as lumber have fallen amid limited supply of homes on the market.

Write to Anna Hirtenstein at [email protected]