Stocks Set to Extend Drop; Dollar, Treasuries Up

0 5

A selloff in stocks looks set to continue in Asia on Tuesday as concern mounts about China’s crackdown on the real-estate sector and the debt crisis at developer China Evergrande Group. Treasuries and the dollar rose.

Futures retreated at least 1% in Japan, Australia and Hong Kong. China’s markets remain closed for a holiday. The S&P 500 fell the most since May, though it pared some losses in the last hour of trading as dip-buyers surfaced. The Nasdaq 100 declined and a gauge of Chinese stocks listed in the U.S. tumbled. U.S. contracts were steady in early Asian trading.

Treasuries gained and the dollar approached its 2021 high as investors sought havens. Aside from worries over Evergrande’s ability to make good on $300 billion of liabilities, Wednesday’s Federal Reserve meeting also looms. Policy makers are expected to start laying the groundwork for paring stimulus.

The property-sector upheaval is part of President Xi Jinping’s broader clampdown on private industries under his “common prosperity” initiative to reduce economic inequality. Investors are awaiting clarity on how the debt mess at Evergrande will be resolved.

Major U.S. stock indexes fall more than 1.5% in unison for first time since May

The risks emanating from China come as investors question stretched equity valuations, in part because the delta virus variant has slowed the reopening from the pandemic amid price pressures stoked by commodities. Markets are also digesting an outlook of reduced central bank policy support.

“Markets are clearly having some angst on the potential spillover effects from Evergrande, along with some nervousness over the September FOMC meeting,” said Cliff Hodge, chief investment officer at Cornerstone Wealth. “We’ve been in the camp that we’re overdue for a correction, something in the 5%-10% range that is a buyable pullback. At the moment, we’re not worried about a market crash. The Fed and Evergrande are not new.”

Here are key events to watch this week:

  • Bank of Japan rate decision, Wednesday
  • Federal Reserve rate decision, Wednesday
  • Bank of England rate decision, Thursday
  • Fed Chair Jerome Powell, Fed Governor Michelle Bowman and Vice Chairman Richard Clarida discuss pandemic recovery, Friday

Some of the main moves in markets:

 Stocks

  • S&P 500 futures were steady as of 7:17 a.m. in Tokyo. The S&P 500 fell 1.7%
  • Nasdaq 100 futures were little changed. The Nasdaq 100 fell 2.1%
  • Nikkei 225 futures fell 1%
  • Australia’s S&P/ASX 200 Index futures dropped 1.4%
  • Hang Seng Index futures lost 1.6%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.1%
  • The euro was little changed at $1.1729
  • The Japanese yen traded at 109.40 per dollar
  • The offshore yuan was at 6.4834 per dollar

Bonds

  • The yield on 10-year Treasuries declined five basis points to 1.31%

Commodities

  • West Texas Intermediate crude was at $70.59 a barrel
  • Gold was at $1,764.37 an ounce
Source Bloomberg

Leave A Reply

Your email address will not be published.