‘Taper tantrum’ by stock markets points to gaps in the easy recovery story | Nils Pratley

Cheap money, the Delta variant and China's sluggish performance add up to tough times ahead

Financial markets these days react to any whiff of tighter monetary policy in the US, so a little drama on Thursday was par for the course after the US Federal Reserve's minutes suggested the winding-down of the huge pandemic stimulus programme could start soon. The Fed will still be buying assets in the autumn, but maybe not at the rate of $120bn (89bn) a month. Commodities fell and shares globally took a hit. The FTSE 100 index dropped 1.5%.

Context is needed, of course. The Footsie had risen by 25% in a straight line, more or less, since the arrival of vaccines last November. If one goes back further to the start of the pandemic, the S&P 500, the main US index, has roughly doubled from its low point. So the odd percentage decline hardly shows up on a medium-term view.

Related: European stock markets tumble on Covid support concerns