Markets waver amid Delta-strain concerns

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Asian stocks and US futures were steady Wednesday after Wall Street inched up to a record as traders weighed economic optimism against risks from a highly infectious coronavirus strain. The dollar held an advance.

The JSE's All Share Index dipped slightly to 66 419 points at the start of trading on Monday, with the rand last at R14.29/$.

Australian equities shrugged off lockdowns targeting the delta variant to climb modestly, while Japan and Hong Kong dipped, though the moves were small. US contracts fluctuated while European futures fell. Overnight, the S&P 500 eked out a gain, remaining on track for a fifth monthly advance. Moderna hit an all-time peak after saying its vaccine produced protective antibodies against the delta strain, which has spread around the world.

The dollar has firmed on haven demand due to Covid-19 flareups, a climb that has hurt gold, which is set for the biggest monthly drop in over four years.

Treasury yields were steady as traders digested the latest Fed comments. On asset purchases, Thomas Barkin said he wants to see much more U.S. labor market progress before slowing them, while Christopher Waller said economic performance warrants thinking about pulling back on some stimulus.

Stocks are up about 90% from the worst of the market panic over the pandemic in March last year, helped by the rollout of vaccines and substantial liquidity injections. The rally has weathered concerns about the possibility of more troublesome virus strains, stretched valuations and the prospect of tighter monetary policy as the global recovery stokes commodity prices and inflation.

“The environment in Q3 should still be supportive for risky assets, though fear of bouts of persistent inflation could alter this scenario,” Sebastien Galy, senior macro strategist at Nordea Investment Funds SA, wrote in a note. “We expect to see bouts of volatility from this.”

Data overnight showed US consumer confidence soared in June to a fresh pandemic high as Americans became more upbeat about the economy and job market. Home prices jumped the most in more than 30 years in April. In China, a gauge of the manufacturing industry was little changed in June, suggesting the economy’s recovery is stabilizing at a solid pace.

Fed officials will be focused on Friday’s employment report as the latest gauge of progress. Payrolls may have risen by 700,000 in June, according to the median estimate in a Bloomberg survey of economists. That would be the biggest increase since March.

“A stronger June employment report would help solidify expectations for a tapering announcement at one of the next few FOMC meetings,” Veronica Clark and Andrew Hollenhorst, economists at Citigroup Global Markets Inc., wrote in a note.

Oil climbed back above $73 a barrel. OPEC+ ministers are divided ahead of a key meeting later this week on production policy.

Additional reporting by Fin24

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