Stocks Drop on China Covid Worries; Dollar Rises: Markets Wrap
(Bloomberg) — Stocks fell amid concern that China may tighten Covid curbs after a string of reported deaths, with investors seeking shelter in the haven assets of Treasuries and the dollar.
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European equities edged lower after gaining for five weeks in a row. S&P 500 and Nasdaq 100 futures contracts both dropped by about 0.4%. Hong Kong led declines in Asia as investors weighed whether the recent rally on a China reopening was overdone.
The dollar climbed against its Group-of-10 counterparts and emerging-market currencies. Treasuries gained across the curve. Oil slipped on concern of a weakening demand outlook from China.
China saw its first Covid-related death in almost six months on Saturday and another two were reported on Sunday. Worsening outbreaks across the nation are stoking concerns that authorities may again resort to harsh restrictions to minimize the death toll, even though they recently called for loosened quarantine and mass-testing rules.
A city near Beijing that was rumored to be a test case for the ending of virus restrictions has suspended schools, locked down universities and asked residents to stay at home for five days.
“Fears of further disruptions to logistical supply chains and the impact this could have on markets resulted in investors rotating back to the safety of the US dollar,” economists at Rand Merchant Bank in Johannesburg said in a note Monday.
Traders this week will also be looking to minutes of the most recent Federal Reserve policy meeting for more clues on the course of rate hikes.
Atlanta Fed President Raphael Bostic said he favors slowing the pace of interest rate increases, with no more than 1 percentage point more of hikes, to try to ensure the economy has a soft landing. Boston Fed President Susan Collins reiterated her view that options are open for the size of the December interest-rate increase, including the possibility of a 75 basis-point move.
Kim Forrest, chief investment officer at Bokeh Capital Partners, said investors could look to the Treasury market for clues on the Fed’s rate-hike trajectory. The yield on the 10-year Treasury has fallen precipitously since the top in late October and shows “a softening inflationary environment,” she said on Bloomberg Television.
“The bond market is a little bit smarter about what the Fed needs to do and what it’s going to do. It’s been telling us that the Fed probably won’t be able to get its rates up to 5% nor will it need to,” Forrest said.
UBS Global Wealth Management expects the dollar to continue strengthening into the end of the year as it believes the market has got ahead of itself on when the Fed could start to give easing signals.
“That’s very clear to us from the Fed speakers that we’ve heard so far over the last week and we think that that would be reiterated as we go forward into this week,” Wayne Gordon, executive director of commodities and foreign exchange, said on Bloomberg Television.
Elsewhere, Cryptocurrency prices struggled in the ongoing crisis sparked by the downfall of Sam Bankman-Fried’s once powerful FTX empire.
Key events this week:
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US Chicago Fed national activity index, Monday
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US Richmond Fed manufacturing index, Tuesday
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OECD releases Economic Outlook, Tuesday
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Fed’s Loretta Mester and James Bullard speak, Tuesday
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S&P Global PMIs: US, Euro area, UK, Wednesday
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US MBA mortgage applications, durable goods, initial jobless claims, University of Michigan sentiment, new home sales, Wednesday
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Minutes of the Federal Reserve’s Nov. 1-2 meeting, Wednesday
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ECB publishes account of its October policy meeting, Thursday
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US stock and bond markets are closed for the Thanksgiving holiday, Thursday
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US stock and bond markets close early, Friday
Some of the main moves in markets :
Stocks
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The Stoxx Europe 600 fell 0.2% as of 8:07 a.m. London time
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Futures on the S&P 500 fell 0.4%
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Futures on the Nasdaq 100 fell 0.4%
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Futures on the Dow Jones Industrial Average fell 0.3%
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The MSCI Asia Pacific Index fell 1%
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The MSCI Emerging Markets Index fell 1.3%
Currencies
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The Bloomberg Dollar Spot Index rose 0.4%
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The euro fell 0.6% to $1.0266
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The Japanese yen fell 0.4% to 140.95 per dollar
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The offshore yuan fell 0.6% to 7.1665 per dollar
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The British pound fell 0.5% to $1.1831
Cryptocurrencies
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Bitcoin fell 1.5% to $16,011.24
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Ether fell 1.6% to $1,123.15
Bonds
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The yield on 10-year Treasuries declined one basis point to 3.82%
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Germany’s 10-year yield advanced two basis points to 2.03%
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Britain’s 10-year yield was little changed at 3.24%
Commodities
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Brent crude fell 0.1% to $87.50 a barrel
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Spot gold fell 0.4% to $1,742.98 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Ruth Carson.
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