GLOBAL MARKETS-Shares fall on fears over China, U.S. taxes, central bank policy

BY Reuters | ECONOMIC | 09/17/21 03:22 PM EDT

* Updates with Europe's close, final prices for oil, adds fresh commentary

* U.S. 10-year treasury yield touches 2-month high

* Wall Street slides, ending seesaw week in a risk-off mood

* European shares fall for third week in a row, miners worst hit

* Dollar hits three-week high, boosted by data, Fed taper view

* Oil falls as storm-hit U.S. supply trickles back into market

By Elizabeth Dilts Marshall

NEW YORK, Sept 17 (Reuters) - World shares fell on Friday, pressured by concerns over China's markets, the potential for a U.S. corporate tax hike and an update on the U.S. Federal Reserve's tapering strategy next week.

The U.S. 10-year treasury note yield rose to touch a two-month high, and the dollar touched a three-week high.

MSCI's gauge of stocks across the globe shed 0.82%, while the pan-European STOXX 600 index closed down 0.9% for a third-straight week of losses. So far this month, the STOXX is down about 2%.

MSCI's broadest index of Asia-Pacific shares outside Japan was 0.09% higher.

Shares in embattled property developer China Evergrande (EGRNF) , which has two trillion yuan ($310 billion) in liabilities and faces an $80 million bond coupon payment next week, dropped 30% this week.

In the United States, concerns grew that a potential hike in corporate taxes could eat into earnings as leading Democrats and President Joe Biden sought to raise the top tax rate on corporations to 26.5% from the current 21%.

The Federal Reserve, facing a labor market that may be stalling or on the cusp of a surge, is expected next week to open the door to reducing its monthly bond purchases while tying any actual change to U.S. job growth in September and beyond.

"The big test comes as we move past the Delta wave - we will see how long it takes to loosen up the supply side of the economy," wrote Bank of America economist Michelle Meyer. "Whether the supply constraints are fleeting or persistent matters for the Fed. The former allows for easy policy to continue."

The Dow Jones Industrial Average fell 203.08 points, or 0.58%, to 34,548.24, the S&P 500 lost 44.72 points, or 1.00%, to 4,429.03 and the Nasdaq Composite dropped 181.07 points, or 1.19%, to 15,000.86.

Stock market prices were expected to be erratic on Friday due to "quadruple witching" day, when four different futures and options contracts expire.

The yield on benchmark 10-year Treasury notes was 1.3684%.

The yield on Germany's 10-year government bond, the benchmark for the euro zone, was at -0.280% after rising as much as 3.5 basis points to a two-month high of -0.277%, after a Financial Times report suggested the European Central Bank expects to hit its 2% inflation target by 2025.

Stronger-than-expected U.S. retail sales data on Thursday boosted the dollar, which held steady near the previous day's three-week high against an index of currencies.

The dollar index, a gauge of the greenback's value against six major currencies, rose to 93.206, its highest since late August.

The euro down 0.31% to $1.1727.

Spot gold dropped 0.1% to $1,751.90 an ounce. U.S. gold futures fell 0.26% to $1,749.40 an ounce.

U.S. crude recently fell 64 cents to $71.97 per barrel, and Brent settled at $75.34 a barrel, down 33 cents on the day.

(Reporting by Elizabeth Dilts Marshall; Editing by Andrew Heavens and Nick Zieminski)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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