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European stocks drifted and bourses in China fell after Beijing reimposed travel restrictions to curb the spread of the Delta coronavirus variant.
The Europe-wide Stoxx 600 gained 0.2 per cent while the UK’s FTSE 100 drifted as investors waited on the outcome of the latest Bank of England meeting later on Thursday.
The BoE’s monetary policy committee is not expected to withdraw the massive stimulus that it has pumped into the economy throughout the pandemic, despite upticks in inflation and a strong growth outlook. However, the UK central bank may begin to lay out plans for an eventual winding down of its bond-buying programme.
“The [BoE’s] exit strategy, we think, will highlight the bank’s focus on unwinding its bloated balance sheet more so than on hiking rates,” economists at Deutsche Bank noted.
Gilt yields on the benchmark 10-year were largely unchanged at 0.52 per cent, while the pound gained 0.2 per cent against the dollar to purchase $1.3914.
In Asia, Hong Kong’s Hang Seng index fell 0.8 per cent and the CSI 300 index of Shanghai- and Shenzhen-listed shares dropped 0.6 per cent as China imposed new nationwide travel restrictions as cases of the Delta variant spread to 15 provinces.
Investors will also focus much of their attention on Friday’s US jobs report after payrolls and services sector data released earlier in the week gave mixed signals on the direction of the country’s economic recovery. Economists polled by Bloomberg forecast that the world’s largest economy added 870,000 jobs in July, up from June’s blockbuster 850,000 figure. The jobless rate is predicted to have dipped to 5.7 per cent, down from 5.9 per cent in June.
A strong jobs print would intensify speculation about when the US Federal Reserve may begin to taper its $120bn in monthly asset purchases, which have supported the economy throughout the pandemic. “We expect that taper talk could lead to stock market volatility, given the stretched technical indicators,” said analysts at Credit Suisse.
Statements from two Fed officials on Wednesday hinted that the central bank was beginning to lay the foundation for a reduction in its bond-buying programme and eventual rate rises from historic lows. Treasuries, which had rallied early in the day, sold off in response. The 10-year yield traded at 1.18 per cent on Thursday, from Wednesday’s low of 1.13 per cent.
Elsewhere, global oil benchmark Brent crude edged 0.1 per cent lower, bringing its slide for the week to almost 8 per cent as worries that the spread of the virus could depress demand outweighed tensions in the Middle East with Iran, which had supported prices.
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