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Investors step back from risk amid worries over China data, Afghanistan

WASHINGTON: Investors generally shied away from risk Monday, as turmoil in Afghanistan, fresh concerns about an economic slowdown in China and the spreading coronavirus Delta variant put the brakes on last week's equities surge.

Wall Street's major indices were all down around midday Monday after notching fresh record gains last week, with the tech sector taking the brunt of the losses. At the same time, safe-haven investments such as gold, the dollar and US Treasuries saw increased investor demand.

The Dow Jones Industrial Average fell 0.04 per cent, the S&P 500 lost 0.21 per cent, and the Nasdaq Composite dropped 0.73 per cent. The MSCI world equity index, which tracks shares in 45 nations, fell 0.46 per cent.

"It's undeniable that there are concerns looming that could spook some investors - Delta, weak growth abroad, and conflict in Afghanistan," said Chris Larkin, managing director of trading at E*TRADE Financial.

"While there's no shortage of factors that could be weighing on traders, keep in mind short-term volatility is par for the course when the market continues to notch record highs."

The dollar ticked up against a basket of six major currencies, rising 0.1 per cent to 92.623 after dropping to a one-week low on Friday.

In more risk-off moves, US Treasury yields slipped as demand for safe-haven US bonds ticked up. Benchmark 10-year yields fell to 1.25 per cent.

Muted investor appetite kicked off the week after figures on July retail sales, industrial production and urban investment in China all missed forecasts, a trend that is only likely to get worse given the recent tightening in coronavirus restrictions there.

Further adding to dour investor sentiment was the sudden collapse of the Afghan government and what it may mean for political stability in the region.

Concerns that a resurgence of coronavirus cases could weigh on travel demand pushed down oil prices. Brent crude was last down 1.27 per cent, at US$69.69 a barrel. US crude was last down 1.39 per cent at US$67.49 per barrel. However, oil had been down as much as 3 per cent earlier in the session, with those losses trimmed after sources told Reuters that OPEC and its allies believe the markets do not need more oil than they plan to release in the coming months.

FED MINUTES WATCH

The Federal Reserve will again step into the spotlight for investors this week, with minutes from its July policy-setting meeting due for release Wednesday. Markets will be looking for signals the Fed is preparing to begin easing back on its monthly bond purchases. Recent strong jobs data from the United States is boosting expectations the Fed could step back the stimulus sooner.

"With employment and inflation data suggesting the recession's end, a healthy expansion in growth and progress on fiscal policy, the markets are waiting for the Fed to signal a shift away from maximum accommodation," wrote Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, in a note. "That could happen this week or next."

In commodity markets, spot gold ticked up to US$1,786 per ounce, rising 0.4 per cent. US gold futures were up 0.6 per cent at US$1,789.10.

Source: Reuters

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