World stocks hit by renewed caution over global economy

World stocks fell from the previous session’s record highs and European stocks dropped on Wednesday on renewed caution over the pace of economic recovery. The dollar jumped to oneweek highs as investors reduced exposure to riskier assets.

Accommodative central bank policies and optimism about reopening economies have pushed world stocks to record highs, but concerns are mounting about the impact of rising coronavirus infections from the Delta variant.

Markets are also still assessing data from last week which showed the US economy created the fewest jobs in seven months in August.

The Fed should move forward with a plan to taper its massive asset purchase programme despite the slowdown in job growth, St Louis Federal Reserve Bank President James Bullard said in an interview with the Financial Times on Wednesday.

“Everything is tapering, tapering, tapering. We are looking at every single central bank — when is the next one?” said Eddie Cheng, head of international multi- asset portfolio management at Wells Fargo Asset Management, though he added: “The Delta variant impact is still running like a wild card.” The MSCI’s world equity index fell 0.24percent after seven consecutive days of gains.

European stocks fell more than 1percent to their lowest in almost three weeks, while the UK’s FTSE 100 dropped 0.85percent to twoweek lows.

S& P futures fell 0.34percent after the S& P 500 lost 0.34percent overnight, but the Nasdaq Composite hit record highs as investors favoured Big Tech stocks, which have performed well during the pandemic.

“What is likely ahead of us is a continued but temporary deceleration of economic activity of one to three months which likely started in August,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.