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Taper talk, Delta cases push down oil, boost dollar

Published 08/18/2021, 10:28 PM
Updated 08/19/2021, 04:26 PM
© Reuters. Investors look at computer screens showing stock information at a brokerage house in Shanghai, China January 16, 2020. REUTERS/Aly Song

© Reuters. Investors look at computer screens showing stock information at a brokerage house in Shanghai, China January 16, 2020. REUTERS/Aly Song

By Pete Schroeder

WASHINGTON (Reuters) -Oil fell to its lowest levels since May while the U.S. dollar surged to a nine-month high, as rising COVID-19 cases worldwide and the prospect of a looming Federal Reserve taper threw cold water on risk appetites.

On Wall Street, stocks ended the day mixed, with defensive and tech-heavy stocks regaining ground after two days of losses. The Dow Jones Industrial Average fell 0.19%, while the S&P 500 climbed 0.13% and the Nasdaq Composite added 0.11%.

The MSCI world equity index, which tracks shares in 45 nations, fell 0.73%.

Oil was down for its sixth straight session, with investors retreating over fears of weak demand amid a worsening pandemic and a rising U.S. dollar. Brent crude lost 2.6%, to settle at $66.45 a barrel. The most-active contract for U.S. West Intermediate (WTI) fell 2.6%, to $63.50 a barrel. It fell earlier to $62.41 a barrel.

The rise in Delta variant cases across the United States is weighing on hopes the economy could recover quickly, with recent economic data painting a murky picture.

Reticence to take on risk helped drive a decline in U.S. Treasury yields Thursday, with the benchmark 10-year yields US10YT=RR dipping to 1.242%.

The dollar's safe-haven status and the prospect of an earlier end to Fed stimulus helped push it to a nine-month high. The dollar index, which tracks the greenback against six other currencies, rising 0.46% to 93.566.

The dollar's gain also helped push down gold prices, with spot gold falling 0.37% to $1,780.91 an ounce.

"It’s very much investors grappling with the growth outlook for the global economy, and how aggressive the Fed will taper when they get around to it,” said Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago.

MINUTES MATTER

Minutes from the Fed's July meeting loomed over markets this week, which showed officials dicussing easing back on unprecedented economic stimulus by year's end. While there was some division among Fed officials, steady progress on the economic front, particularly in job gains, could clear the way for an upcoming taper to monthly bond purchases.

The minutes solidified expectations the Fed will step back on stimulus before year's end barring some unpleasant economic surprise.

"Any decision to begin tapering asset purchases will be highly conditional on the data flow. With the recent rise in COVID cases, the Fed will be monitoring the incoming data closely to make sure that the economy continues to make 'substantial further progress' toward its dual mandate (especially on employment) before announcing any changes to its asset purchase program," said Bank of America (NYSE:BAC) Securities analysts in a note, moving up their taper timeline to November from January.

© Reuters. Investors look at computer screens showing stock information at a brokerage house in Shanghai, China January 16, 2020. REUTERS/Aly Song

There was positive news on the employment front Thursday, with the Labor Department reporting that the number of Americans filing new claims for jobless benefits fell to a 17-month low last week. But gains in the job market also help nudge the Fed toward ending its stimulus effort.

The Fed focus now shifts to its annual research conference in Jackson Hole, Wyoming, next week. Fed Chair Jerome Powell is due to give a speech that will be scoured for clues on the central bank's next steps.

Latest comments

Once all UNVACCINATED US adults are terminated by covid, we get herd immunity. Look forward to that day!
look up Dr SEBI get woke young kid get woke
even the vaccinated still get infected be woke
Doom! Despair! Delta! Taper! Taliban! Sell everything now and buy rice and beans!!!
how can you have herd immunity, if you stop the spread? if you stop the spread, you can't have herd immunity.
with a global decline, job growth will decline, and likely price competition would increase, as business will seek to retain cautious customers. media pumps out different versions of this same ole narrative all the time. if they are so right, we'd all have skin cancer, and look like lepers, due to ozone depletion. but, we don't. do we?
CAPITALISM LOST ANOTHER WAR ! ....WORRIERS WIN ONE. CHEERS!!
,😇
🦄🦄🦄
🐎
Do any of you guys even trade futures???
No.
Most of you guys posting are not Americans, you also like to short, that has been painful for a long time. If you KNOW the markets are manulipated then trading should be very, very easy for you. The issue is you don't know and you don't make money from trading so you make excuses about this, that and the other. Get on with trading and stop with the excuses, you won't make any money with excuses, learn your charts, trade them and work hard, if you do you will be fine.
yawn ... all is manipulation
I hope we will see 10-15% market correction
such a nice hungarian name u have
thanks :)
Greenspunk( not on my watch). Berspankme(not on my watch). Dutchboy Yellen(not on my watch). Tom & Jerry Powell(what's this watch they talk about ?) . You will find out soon enough Fool .
Bear is awakening! Keep cash!
There is ZERO , ZIP, NADA probability that the Fed will tapper this year. As a matter of fact more stim will be coming soon. this is clearly another opportunity to buy the dip
More black Tar in the collective Arm of percieved prosperity , the Over Dose is close at hand .
America is depending too much of handouts, once is stopped, everything is negative again. After the 90s, financial markets is very sensitive to anything about China's markets, economy & so forth. Thought USA is always calling herself the world's number one economy? Since the departure of Allan Greenspan, everything is the mess, nothing is working well anymore. The jobless in the rest of world are suffering, no jobs, no income with no benefits at all, but not in America, you get money when you are jobless, what a joke, & they are complaining the most. Get a life, please.
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