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Euro stocks, US futures dip from peaks

·3-min read

European stocks and US index futures have fallen, and world shares retreated from recent record peaks, as markets once more grew jittery about the pandemic ahead of the half-year-end.

Asset markets have been buoyed over the past year by trillions of dollars of monetary and fiscal stimulus by central banks and governments around the world in response to COVID-19, while vaccination roll-outs in recent months are boosting the economic outlook.

"The search for yield is a very powerful force. It doesn't have the narrative right now to stop it," Sebastien Galy, senior macro strategist at Nordea Asset Management, said.

But stocks trimmed some gains on the last trading day of the month and half-year, amid concerns about the more infectious Delta variant of COVID-19.

"At the end of the month there may be some re-balancing going on," said Giuseppe Sersale, fund manager at Anthilia in Milan.

"My impression is that there is a fear for the impact of the Delta variant on the summer season in Europe."

Indonesia, Malaysia, Thailand and Australia are all battling virus outbreaks and tightening restrictions, while Spain and Portugal announced restrictions for unvaccinated British tourists.

European stocks fell 1 per cent and US S&P futures dipped 0.2 per cent.

German stocks dropped 1.4 per cent and British shares fell 0.67 per cent.

However, the European benchmark, which hit record highs this month, remains on course to post its biggest first-half percentage gain since 1998.

Euro zone inflation eased in June in line with forecasts but is expected to move well above the European Central Bank's target towards the autumn on higher commodity prices.

MSCI's global share index fell 0.2 per cent but was set for a fifth straight month of gains, a day after hitting an all-time high, and for a rise of more than 11 per cent in the first half.

US shares were buoyant on Tuesday after US consumer confidence jumped to its highest level in nearly one-and-a-half years in June, with growing labour market optimism as the economy reopens offsetting concerns about higher inflation.

Steven Daghlian, market analyst at CommSec in Sydney, said that following the global run-up in equities, markets were on edge ahead of Friday's release of US non-farm payrolls data that could influence Federal Reserve policy.

The US dollar was headed for its best monthly rise since March, mostly in the wake of a surprisingly hawkish shift in the Fed's rates outlook.

A "very optimistic" Fed Governor Christopher Waller said on Tuesday it may need to start dialling down its massive asset purchase program as soon as this year to allow the option of raising interest rates by late 2022.

The US dollar index rose 0.04 per cent to 92.102, with the yen up 0.01 per cent to 110.51 and the euro down 0.05 per cent at $US1.1891. Sterling was up 0.14 per cent at $US1.3854.

The benchmark 10-year US Treasury note yield fell more than 2 basis points to 1.4578 per cent.

MSCI's index tracking Asian shares outside Japan was set for a small monthly loss, but still on course for a fifth straight quarterly rise, its longest such streak since 2006-2007. The index was down 0.31 per cent.

Chinese blue chips added 0.65 per cent. Japan's Nikkei was down 0.07 per cent.

Oil prices were heading for monthly and quarterly gains.

Brent crude rose 0.7 per cent to $US75.30 per barrel and US crude jumped 1 per cent to $US73.73, after an industry report showed US stockpiles fell last week.

Spot gold lost 0.19 per cent to $US1754.73 an ounce, putting it on course for its biggest monthly drop since November 2016.

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