Global shares stabilize after the Dow's worst day of 2021, while cryptocurrencies tumble as risk aversion remains high

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  • US futures rose and global shares stabilized on Tuesday after the biggest daily drop in the Dow in 2021.
  • Rising COVID-19 cases and concerns about delayed economic recovery triggered a global equities sell-off.
  • Cryptocurrencies tumbled off the back of weaker financial markets as investors remained risk averse.
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US futures rose and global shares stabilized on Tuesday after a widespread selloff the previous day, as rising COVID-19 cases and concerns about a delay to economic recovery hit investor risk appetite.

Dow Jones futures were last up 0.73%, while S&P 500 futures gained 0.57% and Nasdaq futures rose by 0.5% at 4:17 am E.T. on Tuesday. All major US indices declined on Monday, with the S&P 500 experiencing its steepest decline since May and the Dow seeing its largest daily drop so far this year.

Virus-sensitive asset groups, such as energy and travel stocks, suffered as concerns about the rising delta variant cases and resulting lockdown restrictions mounted, causing investors to be less optimistic about the outlook for growth.

“For so long this year, the overriding concern for investors had been that the global economy might be susceptible to overheating, as the reflation trade took hold. Now, the worry is that growth might have peaked while prices continue to rise albeit on a slowing basis, raising concerns about stagflation.” Michael Hewson, chief market analyst at CMC Markets, said.

The yield on the US 10-year Treasury note was last 1.215%, up 3.4 basis points, but still around its lowest since February this year, reflecting confidence among fixed income investors in the Federal Reserve’s ability to keep inflation in check.

Asian markets fell again Tuesday, but declines were less steep compared to Monday. The Shanghai Composite closed 0.07% down, while Hong Kong’s Hang Seng index lost 0.89% and Tokyo’s Nikkei 225 declined by 0.96%. Japanese inflation data was published earlier in the day and showed that core inflation rose to a 15-month high in June.

European markets recovered some losses on Tuesday after the FTSE 100 closed at a three-month low and the DAX ended the day at a two month low on Monday. Frankfurt’s DAX was last up 0.85%, the Euro Stoxx 50 had gained 0.99% and the FTSE was up 1.05%.

Cryptocurrencies tumbled off the back of the equity market sell-off as investors risk aversion remained high. The largest cryptocurrency by market value, bitcoin, fell by 5.6% to $29,790.27 in the 24 hours to 4:59 am E.T on Tuesday. It has declined almost 54% since mid-April’s record highs, according to Coingecko data.

“Bitcoin is the ultimate risky asset right now and it could see intense selling pressure if Wall Street enters into panic selling mode.” Edward Moya, senior market analyst at OANDA, said.

Oil prices recovered on Tuesday after falling to a seven-week low on Monday after OPEC+ reached an agreement on the pace of supply increases. Oil production is thereby set to increase despite the threat of the increase in cases of COVID-19 to the economy. Brent crude was last up 0.8%, trading at $69.17 per barrel, while WTI crude had risen by 0.47% to $66.66 per barrel.