US indices closed the week (16-20 August) lower with the S&P 500 shedding 0.6%, the Dow Jones Industrial Average gave up 1.1% while the tech-heavy Nasdaq Composite lost ground by 0.7%. Both the FTSE All-World index and the MSCI index for Asia Pacific were also down by 1.8% and 1.9% respectively for the week.

With the positive catalyst from strong earnings from US retailers in the rearview mirror and technicals starting to look weak, investors turned to haven assets such as the US dollar while selling commodities causing iron ore, copper and crude oil already reeling on signs of slowing global economic growth to slip.

Market sentiments had been spooked not only by a prospective shift in timeline for the US Fed’s transition away from liquidity driving policies following the release of the July meeting minutes but also rising worries that the spread of the coronavirus Delta variant will put the brakes on economic re-openings, hurting consumer sentiments and hence global recovery. The fact that Australia and New Zealand were among countries that implemented sudden lockdown measures is a reflection of the concerns over the virus spread.

Goldman Sachs has meanwhile cut its US economic growth forecast for the third quarter to 5.5% from 9%, citing that the impact of the Delta variant on growth and inflation is "proving to be somewhat larger than we expected."

Then, there is also the backdrop of the unremitting clampdown of the Chinese tech sector by state watchdogs taking place amid moderating growth out of China with industrial production falling to its slowest 11 months with fixed assets investment missing expectations. China's new data privacy law which will come into effect in November had weighed heavily on sentiment across the region which have seen the value of Tencent dropped by 11% and Alibaba by 16.5% for the month to date.

The cocktail of negative news and worries has led to more investors fleeing for safe haven bonds as well as into cash on the evidence of an uptick in flows into government money market accounts for the second week in a row, according to the Investment Company Institute. Caution was also seen rising in the options markets as more traders turned to derivatives to hedge against equities falling in value.

This week will see the release of data from US home sales, durable goods, jobless claims, personal income and spending and consumer spending while the data coming out from Asia include China's July industrial profits; Taiwan's July industrial output (Bloomberg Est +17.6% y/y from +18.37% y/y in June); South Korean trade data for the first 20 days of August; Australia's August Markit PMIs for manufacturing and services as well as trade figures from Thailand, New Zealand, Hong Kong and Malaysia.

However, all eyes will likely be on the US Fed's annual symposium. Investors will be seeking more clues to the central bank's tapering roadmap though it is likely that the Fed chair Jerome Powell will keep a tight lid on the timing and will reiterate that the Fed will rely on data pointing to US employment goals and inflation before making any decision while mindful of the Delta variant's impact.

The fact that the symposium will be held virtually instead of at Jackson Hole in Wyoming is a further indication of the fallout of the Delta virus spread despite the high vaccination rates in the US.

Powell had said previously that the Fed is still "a ways off" from meeting the threshold for tapering with other Fed officials such as Fed Governor Lael Brainard saying last week that the central bank needs to see more improvement in the labour force before pulling back on stimulus support.

Two out of three economists polled by Reuters expect the Fed to announce tapering plans in September, while others are of the view that the Fed will want to see more data and may opt for a later date – possibly at the end of the year or early 2022. Any tapering will likely take 10 months or more before the onset of interest rate hikes.

History showed that the S&P 500 had moved an average move of 0.6% in either direction on the day of the Fed chair’s speech over the last 10 years, while S&P 500 options are currently priced to a 1-day move of about 1% which point to the Jackson Hole event unlikely to spark any big short-term market moves. The S&P 500 has also gone 276 calendar days without a pullback of 5% or more.