Stocks in Europe slumped Thursday while bonds continued to rally, as investors assessed central bank developments and anticipated how the economy will behave next year without as much stimulus.

After a nearly 5 basis point decline on Wednesday, the yield on the 10-year U.S. Treasury

fell to 1.28%. The yield on the U.S. 30-year
which on Wednesday fell to the lowest level since Feb. 10, declined to 1.89%.

The yield on the 10-year German bund

fell to -0.34%. Yields move in the opposite direction to prices.

“The primary message being sent by the bond market seems to be one that investors believe future inflation is likely to become more muted, and future growth more subdued, meaning that monetary policy will not have to tighten as much in order to keep a lid on price pressures,” said Michael Brown, senior market analyst at Caxton FX.

The Stoxx Europe 600

moved 2% lower after closing Wednesday at its second highest level on record. Miners including Rio Tinto

and banks including HSBC Holdings

led the downturn.

U.S. stock futures


also slipped, with the Dow contract

losing nearly 500 points.

It was the first opportunity for overseas investors to react to the latest minutes coming from the U.S. Federal Open Market Committee, which showed division on the timing for reducing the rate of bond purchases. That didn’t come as a surprise since officials have been airing their disparate views in public.

The European Central Bank meanwhile moved from targeting inflation below but close to 2%, to a symmetric 2% target, which is in line with other central banks. The central bank also said it would try to incorporate the impact of housing into its assessment.

“In practice, it will make no major difference in our view as the majority of council members has probably been aiming for that anyway,” said Holger Schmieding, chief economist at Berenberg. He did think the press conference could shift markets. “It could reveal more about the current balance between hawks and doves on the council,” he said.

Fears over the delta variant of coronavirus were exacerbated by news Tokyo was extending a state of emergency, effectively ruling out spectators at the Olympics.

Software maker TeamViewer

was the worst performer in the Stoxx 600, losing 15% after saying its second-quarter billings would come in below its target.

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