Oil prices tank, stocks sink on Fed taper talk, Delta fears

Oil prices tanked Thursday and global stocks mostly sank after the US Federal Reserve signalled it could rein in vast stimulus measures this year.

Sentiment was hammered also by the rapid global spread of the coronavirus Delta variant, signs of Chinese economic weakness and the Taliban's takeover of Afghanistan.

"Investors are spooked by the virus once more, compounded by news that the Federal Reserve in the US may be on the brink of reducing its economic support for the US economy," said analysts at Hargreaves Lansdown.

In late morning deals, Paris' main stocks index briefly tumbled 3.0 percent before paring losses, with the luxury sector hit by demand worries amid concerns especially over China's stumbling economic recovery as well as a looming crackdown on the rich by the authorities.

Luxury firms have come to rely heavily on well-heeled Chinese in recent years, and shares in Paris-listed luxury groups took a hit.

Shares in LVMH fell by 6.4 percent, Kering by 9.5 percent, and Hermes by 4.7 percent.

Analysts at UBS said they believe investor concerns are "driven by three primary factors: 1) renewed Covid-related restrictions; 2) potential macro slowdown; and 3) most recently policy concerns amid the government calling for wealth distribution and clampdown on high incomes."

The Frankfurt and London indices also slumped, mirroring Asia's weak performance.

Wall Street opened the day lower despite data showing new jobless claims fell last week to a pandemic-era low. The blue-chip Dow remained lower while the Nasdaq Composite turned positive and the S&P 500 wobbled around.

Minutes from the Fed's most recent July gathering showed most board members agree on tapering monetary policy in the next few months, sending shockwaves reverberating across trading floors.

- Stronger dollar -

The dollar strengthened against most key rival currencies on talk of tapering being followed by higher US interest rates, according to analysts.

The rising US unit weighed on dollar-priced oil, which slumped more than 3.0 percent as weaker demand expectations amid rising virus fears, notably in commodities-hungry China, also pushed prices lower.

"Concerns about dampening demand expectations as a result of an increase in coronavirus cases worldwide have contributed to the drop" in oil, said AvaTrade analyst Naeem Aslam.

"The rise in the dollar... has added to the downside pressure."

And after chalking up record highs on numerous occasions in recent weeks, New York's main stocks indices ended in the red again Wednesday after most Fed members agreed on tapering, or reducing, its asset purchases in the next few months.

The purchases of bonds by the Fed helps lower borrowing rates, giving a boost to economic activity, as well as encouraging investment in stocks.

The shift in sentiment by Fed policymakers comes as a string of data shows the world's top economy well on the road to recovery.

"Nerves are clearly rising around the Delta variant and the timing of the Fed's taper, but I don't think we learned anything from the minutes on Wednesday that warrants" the big sell-offs, said Oanda analyst Craig Erlam, adding they simply confirmed market expectations.

- Key figures around 1530 GMT -

New York - Dow: DOWN 0.4 percent at 34,810.94 points

EURO STOXX 50: DOWN 1.5 percent at 4,125.18

London - FTSE 100: DOWN 1.5 percent at 7,058.86 (close)

Frankfurt - DAX 30: DOWN 1.3 percent at 15,765.81 (close)

Paris - CAC 40: DOWN 2.4 percent at 6,605.89 (close)

Tokyo - Nikkei 225: DOWN 1.1 percent at 27,281.17 (close)

Hong Kong - Hang Seng Index: DOWN 2.1 percent at 25,316.33 (close)

Shanghai - Composite: DOWN 0.6 percent at 3,465.55 (close)

Euro/dollar: DOWN at $1.1686 from $1.1711

Pound/dollar: DOWN at $1.3665 from $1.3756

Euro/pound: UP at 85.52 pence from 85.13 pence

Dollar/yen: DOWN at 109.74 yen from 109.77 yen

West Texas Intermediate: DOWN 3.9 percent at $62.88 per barrel

Brent North Sea crude: DOWN 3.6 percent at $65.79 per barrel