Global stock sell-off deepens on Delta variant fears

​​The threat of the Delta variant of Covid-19 hit Asian markets on Tuesday, after US and European stocks fell sharply on concerns that new outbreaks would hit global growth.

The equities sell-off snapped a months-long streak of gains for international markets as the rapid spread of the Delta strain, a highly infectious mutation of the virus that has swept across the world in recent weeks, put economies that had been steadily recovering on the back foot. 

Japan’s benchmark Topix dropped 1 per cent while Australia’s S&P/ASX 200 and South Korea’s Kospi fell 0.6 and 0.7 per cent, respectively. Hong Kong’s Hang Seng index reversed early gains to shed 1.2 per cent, while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks was down 0.5 per cent.

Overnight, Wall Street’s S&P 500 index closed 1.6 per cent lower and the technology-focused Nasdaq Composite fell 1.1 per cent. London’s FTSE 100 dropped 2.3 per cent, as did the Stoxx Europe 600. 

Futures for the S&P 500 were up 0.2 per cent while those for the FTSE 100 were flat ahead of the London markets open on Tuesday.

“Investors are worried that a fresh outbreak could potentially hinder the pace of economic reopening,” said Tai Hui, chief Asia market strategist at JPMorgan Asset Management. “The next one to two months will be an important litmus test of governments’ strategy in normalising lives and economic activities amid the threat of the pandemic.”

In currency markets, sterling slipped 0.1 per cent to $1.3667 after dropping 0.7 per cent during the previous session, marking its lowest level since early February. 

The UK currency has been hit by a sudden resurgence of Covid-19 outbreaks just as the government removed the last of its restrictions to contain the virus. On Monday, the US Centers for Disease Control placed the UK on its highest tier of Covid travel warnings, urging Americans not to visit as England celebrated “Freedom Day”.

In bond markets, the yield on the 10-year US Treasury steadied at about 1.2 per cent, a hair above its lowest level in six months as investors continued to seek safety in government debt. Yields fall as bond prices rise.

Oil prices steadied after initially dropping on Monday in the wake of the Opec+ countries’ decision to increase production by 400,000 barrels a day each month into next year.

Brent crude, the international benchmark, rose 0.2 per cent to $68.78 a barrel on Tuesday, while US marker West Texas Intermediate fell 0.1 per cent to $66.52.