(Bloomberg) — Stocks extended declines on Friday amid a drop in global technology shares as concerns about tightening monetary policy and economic risks from the fast-spreading omicron virus variant sapped sentiment.
Tech shares led declines in Europe’s Stoxx 600 index on concern tightening monetary policy will hurt extended valuations. Asian tech stocks also fell, along with Nasdaq 100 futures.
Central banks globally are prioritizing the fight against elevated inflation by tightening monetary settings, while also keeping a wary eye on the impact of omicron. That backdrop has investors questioning whether global stocks are due for a rougher patch after almost doubling from pandemic lows.
“The cycle you are seeing here is really about a change in tone, a change in regime, the possibility of tighter policy next year, not just at the Fed, but globally,” Alicia Levine, head of equities and capital markets advisory at BNY Mellon Wealth Management, said on Bloomberg Television.
The 10-year Treasury yield and dollar were little changed. In Turkey, the lira touched an all-time low. Oil retreated for the first time in three days and European natural gas prices plunged from a record close after Russia in the last minute topped up supplies to the region.
Among individual movers, Italian biotech firm DiaSorin SpA and Nordic Semiconductor ASA led declines.
Central Banks
The pound was little changed after the Bank of England unexpectedly raised interest rates on Thursday. The euro also held after the European Central Bank temporarily boosted regular monthly bond buying for half a year to smooth the exit from crisis stimulus.
The Federal Reserve this week doubled the pace at which it tapers bond purchases and projected three quarter-point rate increases in 2022, another three in 2023 and two more in 2024.
Japan’s monetary authority Friday lengthened its cautious withdrawal from emergency pandemic aid in a move that contrasts with the urgency of other major central banks winding back stimulus.
Elsewhere, Senate Democratic leaders failed to break a deadlock over President Joe Biden’s $2 trillion economic agenda, punting action on the tax and spending bill to January in a political blow to the White House.
U.S.-China Tension
The Senate did pass legislation that would ban goods from China’s Xinjiang region unless companies prove they weren’t made with forced labor. The Biden administration also added 34 Chinese targets to its banned-entity list, keeping tension with Beijing on the boil.
In the latest U.S. data, applications for state unemployment benefits rose last week but remained near the lowest levels of the pandemic as the labor market recovery continues. U.S. housing starts strengthened in November to the fastest pace in eight months, while output at factories advanced solidly.
Omicron continues to spread. Biden warned that unvaccinated Americans face “a winter of severe illness and death,” while Japanese Prime Minister Fumio Kishida asked Pfizer Inc. for faster delivery of vaccines.
Here are some key events this week:
- S&P Dow Jones Indices quarterly rebalance effective after markets close, Friday.
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 fell 0.7% as of 9:19 a.m. London time
- Futures on the S&P 500 fell 0.3%
- Futures on the Nasdaq 100 fell 0.9%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index rose 0.8%
- The MSCI Emerging Markets Index rose 0.8%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1337
- The Japanese yen rose 0.1% to 113.52 per dollar
- The offshore yuan was little changed at 6.3815 per dollar
- The British pound was little changed at $1.3334
Bonds
- The yield on 10-year Treasuries was little changed at 1.42%
- Germany’s 10-year yield declined one basis point to -0.36%
- Britain’s 10-year yield declined one basis point to 0.75%
Commodities
- Brent crude fell 1.3% to $74.05 a barrel
- Spot gold rose 0.5% to $1,808.95 an ounce
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