(Bloomberg) — Stocks in Europe pared gains and US futures turned lower as a rout in Chinese shares weighed on global equities. Treasury yields fell and the dollar gained.
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The Stoxx Europe 600 Index held an advance of about 0.6% after rising as much as 1.4% at the open. Prosus NV slumped more than 11%, while basic resources and energy stocks weighed on the benchmark amid a fall in crude oil and gas prices. Contracts on the S&P 500 and Nasdaq 100 fluctuated before edging lower.
China’s yuan weakened along with the nation’s equities as investors reacted to the risks posed by President Xi Jinping’s move to stack his leadership ranks with loyalists. Hong Kong’s Hang Seng Index dropped about 6%, with technology companies among the worst affected.
A gauge of dollar strength rose in choppy trading that saw wild swings in the yen amid signs of a second intervention from Japanese authorities in two sessions. The pound jumped against the greenback and gilts rallied after Boris Johnson pulled out of the race to lead the UK’s ruling Conservative Party, putting former chancellor Rishi Sunak closer to becoming the next prime minister.
“The Hong Kong market is seeing a panic selling moment,” said Dickie Wong, executive director of research at Kingston Securities Ltd. “While China reported macro data that beat expectations, the market is on a way down, as the leadership reshuffle and tensions between China and US continue to drag down sentiment and add uncertainty.”
Chinese economic data that was delayed last week and published Monday showed a mixed recovery, with unemployment rising and retail sales weakening despite a pickup in growth. Yet Xi’s Covid-zero campaign looks likely to continue to drag on the economy and there has been speculation that his “common prosperity” goal may even lead to property and inheritance taxes.
More broadly, markets had been taking cues from the dip in US bond yields as investors looked beyond the present state of aggressive monetary tightening by the Federal Reserve to the next phase, which may see a slowing or pause in interest-rate hikes.
Purchasing Managers Indexes on Monday showed the euro area’s top two economies worsened in October, with the downturn in Germany intensifying and France failing to grow for the first time in 19 months. The European Central Bank is priming another hefty hike in interest rates this week as the attention increasingly switches to how high it will eventually push.
Key events this week:
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Earnings due this week include: Apple, Microsoft, Exxon Mobil, Ford Motor, Credit Suisse, Airbus, Alphabet, Amazon, Bank of China, Boeing, Caterpillar, Cnooc, Coca-Cola, HSBC, Intel, McDonald’s, Mercedes-Benz, Merck, Samsung Electronics, Shell, UBS, UPS, Vale, Visa, Volkswagen
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PMIs for Eurozone, US, Monday
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US Conference Board consumer confidence, Tuesday
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Bank of Canada rate decision, Wednesday
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ECB rate decision, Thursday
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US GDP, durable goods orders, initial jobless claims, Thursday
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Bank of Japan policy decision, Friday
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US personal income, personal spending, pending home sales, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 rose 0.6% as of 8:39 a.m. London time
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Futures on the S&P 500 fell 0.3%
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Futures on the Nasdaq 100 fell 0.3%
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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 2%
Currencies
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The Bloomberg Dollar Spot Index rose 0.4%
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The euro fell 0.3% to $0.9837
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The Japanese yen fell 1% to 149.17 per dollar
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The offshore yuan fell 0.8% to 7.2906 per dollar
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The British pound rose 0.3% to $1.1335
Cryptocurrencies
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Bitcoin fell 1% to $19,294.03
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Ether rose 0.4% to $1,335.77
Bonds
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The yield on 10-year Treasuries declined seven basis points to 4.15%
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Germany’s 10-year yield declined eight basis points to 2.34%
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Britain’s 10-year yield declined 21 basis points to 3.84%
Commodities
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Brent crude fell 1.4% to $92.22 a barrel
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Spot gold fell 0.4% to $1,650.53 an ounce
–With assistance from Charlotte Yang.
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