Stock futures and oil drop as Delta variant sends investors into bonds

A sign that investors were taking refuge in the safety of government bonds and other safe-haven assets, the yield on 10-year Treasuries fell to 1.257% on Monday from 1.30% on Friday. Yields, which fall when bond prices rise, haven’t been this low since mid-February. The WSJ Dollar Index, which tracks the greenback against a basket of other currencies, rose 0.3%.

Oil prices fell after the Organization of the Petroleum Exporting Countries and a Russian-led group of big producers agreed to increase production. Futures on Brent crude, the international benchmark, fell 2.6% to $ 71.67 per barrel, their lowest level since mid-June.

The movements recalled the trade patterns that prevailed at the start of the pandemic. Investors sold stocks of companies directly affected by the restrictions on movement and activity, while buying government bonds and stocks that may benefit from the work-from-home phenomenon.

The increase in coronavirus cases in many parts of the world, including in highly vaccinated countries like the UK, has prompted investors to lower their expectations for economic growth in the coming months. There are also concerns that a sharp rise in prices will squeeze consumption and cause central banks to withdraw stimulus measures, creating an environment of weaker growth and higher inflation in which stocks tend to struggle. .

“What you are seeing is the feeling that the consumer is starting to be affected quite significantly” by the price hike, said Sébastien Galy, senior macro strategist at Nordea Asset Management.

Business reopenings, rising immunization rates and government pandemic assistance have helped propel rapid gains in consumer spending, the main engine of the economy. But surveys show that inflation, which accelerated to a 13-year high in the United States in June, is starting to shake consumers’ confidence in their ability to keep spending, Galy said.

Airlines and oil and gas companies were among the worst performers before the bell in New York. Occidental Petroleum lost 4.1%, ConocoPhillips 3.6%, American Airlines Group 2.3% and Delta Air Lines 2.2%.

A bright spot was Five9,

which jumped 8.3% on news that Zoom Video Communications plans to buy the cloud-based customer service software provider in a deal valuing the company at $ 14.7 billion. Zoom shares fell 2% in pre-market trading.

Concerns about the economic effects of the virus were evident in a large setback in global markets. The regional Stoxx Europe 600 slipped 1.9%, dragged down by shares of economically sensitive travel, leisure and commodities companies.

Potential beneficiaries of a protracted pandemic, including HelloFresh food delivery companies,

Deliveroo and Just Eat Takeaway.com have grown.

Among other stocks, Vivendi, listed in Paris, fell 1.2%. Pershing Square Tontine, a blank check company run by hedge fund manager Bill Ackman, said it had abandoned plans to buy a 10% stake in Universal Music Group. Mr. Ackman’s Pershing Square said he would instead take a large stake in Universal, majority owned by Vivendi.

Italian luxury fashion house Ermenegildo Zegna will be listed on the New York Stock Exchange later this year as part of a combination deal with special purpose acquisition company Investindustrial Acquisition. Shares of SPAC, whose chairman is former UBS CEO Sergio Ermotti, edged down ahead of the bell in New York.

In Asia, tech giants Alibaba and Tencent weighed on Hong Kong’s Hang Seng Index, which had lost 1.8% at market close. The losses came after the Biden administration on Friday warned U.S. companies of the growing risks of operating in the financial center.

The Japanese Nikkei 225 lost 1.3%. More athletes and staff participating in the Tokyo Olympics have tested positive, as cases rise in Indonesia. Sydney, Australia’s most populous city, is stranded due to a delta epidemic.

David Chao, market strategist at Invesco, said the spread of the delta variant across Asia, coupled with low vaccination rates and expectations of additional social distancing measures, has “set the stage for many investors who expect an economic rebound ”in the region.

Mr Chao said he expected investors to continue withdrawing funds from Asian stocks and moving them to stocks in developed markets with high inoculation rates, such as the United States and the United States. UK.

Write to Joe Wallace at [email protected] and Frances Yoon at [email protected]