A look at the day ahead from Tommy Wilkes.
After an August in which stock markets have repeatedly hit record highs, the mood music turned decisively more sombre on Thursday, led by a late slump in U.S. stocks which cascaded into already jittery Asian markets.
While European and U.S. markets have roared higher in recent weeks, Asian shares have moved downwards and slumped to their lowest levels this year on worries about the spread of the COVID-19 Delta variant and widening regulatory crackdown concerns in China.
There was no obvious catalyst for the selling on Thursday but there were clear signs beyond stocks that investors are growing concerned that the boom in asset prices in 2021 has gotten ahead of itself and the global economy recovery may slow.
Commodities fell again with oil prices down for a sixth straight session and at three-month lows, while growth bellwether copper fell to a two-month trough.
The dollar, the go-to safe haven currency for investors when uncertainty reigns, rose to a 10-month high.
According to minutes from last month's Federal Reserve policy meeting published on Thursday, officials felt their employment benchmark for decreasing support for the economy "could be reached this year", adding to investors' view that the tapering of bond-buying is not far off.
Investors will also be watching a Norges bank rate decision closely due at 0800 GMT. The Norwegian central bank may be one of the first globally to raise rates from record lows as the economy rebounds from the pandemic.
Both U.S. and European stock futures were in the red, following the sharp move lower in Asia.
In corporate news, the Nikkei business daily reported that Toyota would slash car production by 40% in September from its previous plan due to the worldwide shortage of semiconductors. That helped send the Japanese stock index to a seven-month low.
Key developments that should provide more direction to markets on Thursday:
-Emerging markets: Indonesia, Botswana, Sri Lanka central bank meetings
-Norges Bank policy meeting
-Auction: US 20-year bonds, 4-week t-bills, 30-yr TIPS
-U.S. initial jobless claims/Philly Fed/
-U.S. earnings:, Estee Lauder (NYSE:EL), Macy’s, Kohl’s
(GRAPHIC - Federal Reserve assets held: https://fingfx.thomsonreuters.com/gfx/mkt/zjvqkkejzvx/Pasted%20image%201629319033899.png)