U.S. Futures, Stocks Fall With Focus on China, Fed

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Asian stocks and U.S. futures fell Wednesday as traders assess the debt crisis at China Evergrande Group and gird for a Federal Reserve meeting that is expected to signal a reduction in stimulus later this year.

Equities in Japan and Australia retreated. China resumes trading later in the morning after a two-day holiday, while Hong Kong is shut. S&P 500 and Nasdaq 100 contracts declined after dip-buying waned in the U.S. session, leaving the broader U.S. benchmark gauge little changed.

Evergrande, which has more than $300 billion of liabilities, missed some interest payments due Monday and investors are seeking clues about how Beijing plans to deal with the cash crunch. The Chinese central bank’s daily open-market operations may hint at whether officials are aiming to avert systemic stress.

Treasuries were steady ahead of Wednesday’s Fed meeting. A strong auction of 20-year debt highlighted cautious sentiment and demand for less risky investments. The dollar was little changed. Elsewhere, Bitcoin slid below $40,000 for the first time since early August before rebounding.

Share of S&P 500 members trading above their 50-day average hits 11-month low

Both the Fed’s potential timeline for tapering stimulus and any shifts in expectations for interest-rate increases amid elevated price pressures will be key for investors. The Fed meeting comes after a period of market volatility stoked by fears of contagion spreading from Evergrande. China’s wider property-sector curbs are also feeding into concerns about a slowdown in the economic recovery from the pandemic.

“There are a lot of challenges in the face of this economy, and that gives me some concern,” said Julie Biel, portfolio manager at Kayne Anderson Rudnick, referring to the U.S. “Not to mention the inflation pressures — it’s going to be hard to gauge whether they are really temporary or longer term.”

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 fell 0.4% as of 9:18 a.m. in Tokyo. The S&P 500 was little changed
  • Nasdaq 100 futures fell 0.5%. The Nasdaq 100 rose 0.1%
  • Japan’s Topix index fell 0.6%
  • Australia’s S&P/ASX 200 Index lost 0.2%

Currencies

  • The Japanese yen was at 109.13 per dollar, up 0.1%
  • The offshore yuan traded at 6.4818 per dollar
  • The Bloomberg Dollar Spot Index rose less than 0.1%
  • The euro was little changed at $1.1723

Bonds

  • The yield on 10-year Treasuries edged down to 1.31%
  • Australia’s 10-year bond yield fell two basis points to 1.25%

Commodities

  • West Texas Intermediate crude was at $70.70 a barrel, up 0.3%
  • Gold was at $1,774.74 an ounce
Source Bloomberg

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