GLOBAL MARKETS-Stocks, bond yields down as growth and taper fears haunt markets

* Dollar index scales nine-month peak

* Oil, copper under pressure

* U.S. futures down nearly 1%

LONDON, Aug 19 (Reuters) - Stocks and bond yields dropped and the dollar hit a nine-month peak on Thursday as fears of slowing global growth into year-end were compounded by the prospect of the Federal Reserve cutting back its supportive bond purchase programme at the same time.

Europe’s pan-regional STOXX 600 index suffered its biggest daily decline in a month. Its near-2% slide dragged the global stocks benchmark to a three week low. Emerging market stocks sank to their lowest this year.

U.S. futures suggested more pain ahead on Wall Street and commodities were under pressure with oil down for a sixth straight session and at three-month lows. Growth bellwether copper hit its lowest in more than four months.

The latest selloff comes after minutes from the Federal Reserve’s July meeting published on Wednesday showed officials expected they could ease stimulus this year, even though there was division over the labour market recovery and the level of risk posed by rising coronavirus cases.

Fed policymakers were far from united in their view. But the prospect of stimulus being reduced when the rapid spread of the Delta variant, China’s regulation crackdown and supply chain issues were already dampening the economic recovery spooked markets.

“It is just a sea of red and top of the agenda is, what the Fed is going to do,” said Neil MacKinnon, global macro strategist at VTB Capital in London.

“The big picture story is: Could the Fed be making a policy error here? It wants to taper, we’ve seen that message in the FOMC minutes, but could the Fed be tapering into a cyclical economic slowdown in the third and fourth quarters? There’s a risk of that.”

The focus now shifts to the Fed’s annual research conference in Jackson Hole, Wyoming, next week where central bankers from around the globe gather and Fed chair Jerome Powell is due to give a speech which will be scoured for clues on the central bank’s next steps.


Meanwhile the dash to safe haven assets helped U.S. Treasury yields cling to recent lows, with benchmark 10-year yields at 1.24%.

Euro zone government bond yields also fell with German 10-year Bund yields, the benchmark for the bloc, falling a basis point to -0.49%, within touching distance of a six-month low hit earlier this month.

Japan’s Nikkei share average fell 1.1% to its lowest since early January, pulled down by Toyota Motor whose shares tumbled on news that it will cut its output by 40% next month due to a chip shortage.

Reverberations from Beijing’s regulations continued to be felt with U.S.-listed shares of Chinese tech companies down premarket after China’s Tencent Holdings warned that the internet industry should brace for more regulations.

The slump in Asian stocks to their lowest level this year, also rattled policymakers. Taiwan’s Finance Ministry has called state-owned banks to suggest they buy an “appropriate” amount of stocks, Reuters reported, citing sources familiar with the matter.

“You can’t find a bull out there,” said Kay Van-Petersen, a global macro strategist at Saxo Capital Markets in Singapore.

Frayed nerves supported the dollar, which was up 0.1% to $1.16975 per euro after touching its highest since November 2020. The dollar index was up 0.1% after earlier trading at its highest since November 2020.

Norway’s crown extended falls against the dollar to 1.3% after the central bank kept its key policy rate on hold at a record low of 0.0% but said it would stick to its plan to raise rates next month as the economy rebounds.

The CBOE Volatility index, also known as Wall Street’s fear gauge, was up 2 points at its highest level in about a month and the S&P 500 index fell 1% to a two-week low.

Oil prices fell for a sixth day in their longest losing streak since February 2020, with Brent crude dropping nearly $2 a barrel to trade at $66.27 and U.S. crude slipping $2 to trade at $63.44.

Gold treaded water with the spot price dropping at $1,788.33.

Reporting by Karin Strohecker in London, additional reporting by Alun John in Hong Kong. Editing by Jane Merriman and Emelia Sithole-Matarise