U.S. Shares Retreat, European Shares end Little-Changed

Major U.S. indexes were lower, pulling back from earlier gains but still close to all-time highs.

The Dow Jones Industrial Average fell 133.74 points, or 0.38%, to 34,897.33, the S&P 500 lost 14.45 points, or 0.32%, to 4,499.62 and the Nasdaq Composite dropped 4.28 points, or 0.03%, to 15,282.36 by mid afternoon.

Federal Reserve Bank Governor Michelle Bowman added her voice Wednesday to the growing number of policymakers who say the weak August jobs report likely won’t throw off the central bank’s plan to trim its $120 billion in monthly bond purchases later this year.

Earlier in the day, U.S. data showed the number of Americans filing new claims for jobless benefits fell to the lowest level in nearly 18 months last week, offering more evidence that job growth was being hindered by labor shortages rather than cooling demand for workers.

After falling as much as 0.9% in morning trade, the pan-European STOXX 600 index ended largely unchanged around 467.57 points. The index had shed 1.5% over the past two days on fears of a more-hawkish-than-expected ECB.

Euro zone bonds yields tumbled as the European Central Bank took its first tentative step in withdrawing COVID-era stimulus. Southern Europe led a fall in euro zone sovereign bond yields.

The euro rose 0.15% against the dollar, climbing for the first time in four sessions, while bond markets cheered by sending French 10-yields negative again.

“We’re seeing some modest weakness mainly because the market is just in flux. There is no real clarity on when we will start to see the Fed and ECB start to pull back stimulus,” said Edward Moya, a senior market analyst with OANDA in New York.

Instead of hinting at any potential end date for its pandemic-era purchase programme, European Central Bank President Christine Lagarde instead channelled the spirit of former British Prime Minister Margaret Thatcher, saying: “The lady isn’t tapering.”

Germany’s 10-year yield, the benchmark for the bloc, fell. [GVD/EUR]

FRAGILE CHINA

MSCI’s benchmark for global equity markets fell 0.33% to 740.33. Emerging markets stocks fell 1.18%.

The UK’s FTSE 100 dropped 1% with low-cost airline easyJet tumbling over 10% as it tapped shareholders for 1.2 billion pounds ($1.7 billion). [.EU]

MSCI’s broadest index of Asia-Pacific shares ended down 1%, which was its worst daily performance since Aug. 19, the last time markets decided they were worried about the U.S. Federal Reserve tapering its massive asset purchase programme.

Chinese tech giants Tencent, NetEase and Alibaba had slumped 8.5%, 11% and 6% respectively after online gaming chiefs were summoned by authorities to check they are sticking to strict new rules for the sector.

“The global story is looking soft and it’s being hit by the Delta variant plus concern about potentially the Fed still moving towards a taper,” said Rob Carnell, Asia head of research at ING. “It’s an unsettling combination of things.”

The China angst had meant Hong Kong, where many heavyweight Chinese firms are also listed, shed 2.3%.

News that Chinese authorities had told gaming firms to resolutely curb incorrect tendencies such as focusing “only on money” and “only on traffic” had hurt companies with large gaming operations. Tencent fell 8.5%, Bilibili lost nearly 9% and NetEase slumped 11%.

There was more turbulence too for the country’s most indebted property giant, Evergrande.

Media reports the company would suspend some interest payments on loans and payments to its wealth management products sent its shares down more than 10% at one point, although they recovered almost half of the drop on news that some creditors had agreed to loan payment extensions.

Korea’s Kospi fell 1.5%, also under pressure from regulatory scrutiny of local tech players. In Korea’s case, fintech names such as Kakao Corp , which sank 7.2%, and Naver Corp, down 6.9%, were in the spotlight.

Australian stocks lost nearly 2% after payrolls data showed a sharp drop in jobs in the first half of August.

Gold steadied in choppy trading, buoyed by a slight retreat in the dollar. Spot bullion prices were up 0.4%.

Oil prices fell on China’s plan to tap state reserves and a smaller-than-expected drawdown in U.S. crude supplies.

Brent crude was last down $1.14, or down 1.57%, at $71.46 a barrel. U.S. crude was last down $1.16, or down 1.66% at %68.15.

($1 = 0.7246 pounds)

(Additional reporting by Alun John in Hong Kong; Editing by Carmel Crimmins and Nick Zieminski)