World shares slide after S&P500 marks first monthly drop of 2021

Markets have become unsettled with the spread of the Covid-19 Delta variant, inflation and possible Fed tapering

The S&P500 ended September down 4.8 per cent, its first monthly drop since January and the biggest since March 2020. Photo: AP

World markets tumbled on Friday on the tail of Wall Street’s worst monthly loss since the beginning of the pandemic.

Shares dropped in Paris, London, Frankfurt and Tokyo. Shanghai and Hong Kong were closed for a holiday.

The S&P500 ended September down 4.8 per cent, its first monthly drop since January and the biggest since March 2020.

After climbing steadily for much of the year, markets have become unsettled with the spread of the more contagious Delta variant of Covid-19, surging long-term bond yields and word the US Federal Reserve may start to unwind its support for the economy.

Rising inflation has also caused investors to reconsider recent high prices for shares, leading many to sell tech stocks that have soared during the pandemic.

Germany's DAX lost 0.8 per cent to 15,134.21 and the CAC 40 in Paris slipped 0.8 per cent to 6,465.81. London's FTSE 100 declined 1 per cent to 7,013.74.

US futures also retreated, with the contract for the Dow industrials shedding 0.7 per cent. The future contract for the S&P500 was 0.6 per cent lower.

Japan lifted a pandemic state of emergency on Friday after seeing coronavirus caseloads decline as vaccinations picked up pace. A quarterly survey by the Bank of Japan found the mood among large Japanese manufacturers has risen to its highest level in nearly three years as companies look ahead to a recovery.

The results of the “tankan” survey, released on Friday, found sentiment among large manufacturers rose to 18 from 14. That’s the highest level since late 2018. The reading for non-manufacturers edged up only slightly, to 2 from 1.

However, it and various other surveys have found manufacturers struggling with shortages of computer chips and other components, amid disruptions to supply chains and shipping that might crimp the rebound from the pandemic.

Tokyo's Nikkei 225 lost 681.59 points to 28,771.07, while the S&P/ASX 200 declined 2 per cent to 7,185.50. The Kospi in Seoul lost 1.6 per cent to 3,019.18. Shares also fell in Taiwan and Southeast Asia.

The S&P500 lost 1.2 per cent on Thursday but is still up 14.7 per cent for the year. The Dow Jones Industrial Average shed 1.6 per cent, while the Nasdaq slid 0.4 per cent. Small company stocks also lost ground. The Russell 2000 index declined 0.9 per cent.

The yield on the 10-year Treasury note, a benchmark for many kinds of loans, fell to 1.49 per cent early Friday from 1.50 per cent. It was as low as 1.32 per cent just over a week ago.

In recent weeks, economic data has revealed that the highly contagious Delta variant has crimped consumer spending and the job market’s recovery.

The US Labour Department reported that unemployment applications rose for the third straight week and were higher than economists anticipated. The Commerce Department upgraded its estimate of economic growth during the second quarter to 6.7 per cent, which was slightly better than economists expected, but it expects growth to slow to 5.5 per cent during the third quarter.

On Thursday, a bill to fund the US government through December 3 and avoid a partial federal shutdown cleared Congress. But the dispute between Democrats and Republicans over extending the nation's debt limit remains unresolved.

In other trading on Friday, US benchmark crude oil declined 74 cents to $74.29 per barrel in electronic trading on the New York Mercantile Exchange. It rose 18 cents to $75.03 per barrel on Thursday.

Brent crude oil dropped 65 cents to $77.66 per barrel.

The dollar slipped to 111.14 Japanese yen from 111.28 yen. The euro was unchanged at $1.1580.