(Bloomberg) — A rally in global equities faltered Monday under the weight of declines in Chinese shares, with US futures and key Asian indexes losing a large part of earlier gains that were made amid a dip in Treasury yields.
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A gauge of dollar strength advanced in choppy trading that saw wild swings in the yen amid signs of a second intervention from Japanese authorities in two sessions.
The pound was a notable exception in rising against the greenback after Boris Johnson pulled out of the race to lead the UK’s ruling Conservative Party, putting Rishi Sunak closer to becoming the next prime minister.
China’s yuan also 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.
“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.
Ten-year Treasury yields fell further on Monday, to around 4.15%, after reversing a surge on Friday. Yields also dropped in Australia, led by the policy-sensitive three-year maturity.
St. Louis Fed President James Bullard and his San Francisco counterpart Mary Daly last week made clear they expect the discussion at the November gathering to include debate on how high to raise rates and when to slow the pace of increases. They stressed the need to keep tightening for now.
Gains for share gauges in Japan and South Korea fell to less than 1% while the advance in US futures was almost entirely eroded as momentum waned after strong openings that followed stocks on Wall Street having their best week since June.
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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S&P 500 futures rose 0.1% as of 6:51 a.m. London time. The S&P 500 rose 2.4% Friday
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Nasdaq 100 futures rose 0.3%. The Nasdaq 100 rose 2.4%
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Australia’s S&P/ASX 200 Index rose 1.5%
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The Topix index rose 0.4%
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South Korea’s Kospi index rose 0.9%
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The Hang Seng Index fell 5.9%
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Shanghai Composite Index fell 1.6%
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Euro Stoxx 50 futures rose 0.7%
Currencies
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The Bloomberg Dollar Spot Index rose 0.3%
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The euro fell 0.1% to $0.9848
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The Japanese yen fell 0.9% to 148.94 per dollar
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The offshore yuan fell 0.5% to 7.2677 per dollar
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The British pound rose 0.5% to $1.1354
Cryptocurrencies
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Bitcoin fell 0.8% to $19,344.42
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Ether rose 0.9% to $1,342.40
Bonds
Commodities
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West Texas Intermediate crude fell 0.9% to $84.27 a barrel
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Spot gold fell 0.1% to $1,655.73 an ounce
–With assistance from Charlotte Yang.
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