Stocks fall on China Covid worries;  Dollar Rise: Market Recap

Stocks fall on China Covid worries; Dollar Rise: Market Recap

(Bloomberg) – Stocks fell amid fears China would tighten Covid restrictions after a string of reported deaths as investors sought refuge in the dollar.

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The S&P 500 and Nasdaq 100 contracts both fell at least 0.5%. Chinese stocks fell in premarket trading in the United States, as progress on reopening China could face setbacks. Walt Disney Co. defied the gloom, rallying after the company was surprised by bringing back former executive Bob Iger as chief executive. European stocks fell slightly, with mining stocks falling.

The dollar appreciated against its Group of 10 peers and emerging market currencies. Treasuries held steady after giving back earlier gains. Oil sank on fears of a weakening demand outlook from China.

China experienced its first Covid-related death in nearly six months on Saturday and two more were reported on Sunday. Worsening outbreaks across the country are raising fears authorities may again resort to harsh restrictions. A city near Beijing rumored to be a test case for ending virus restrictions has suspended schools, closed universities and asked residents to stay home for five days.

“Not only would further lockdowns in major cities stunt growth through the end of the year, but it could also complicate any plans that are in place to ease the zero-Covid policy next year,” he said. said Craig Erlam, senior market analyst. in Oanda. “We are back in uncertain territory which could slow the stock market recovery.”

Regarding the outlook for equities, strategists at Goldman Sachs Group Inc. said investors hoping for a better year in 2023 would be disappointed as the bear market phase is not yet over.

“The conditions that are generally consistent with an equity bottom have not yet been reached,” strategists including Peter Oppenheimer and Sharon Bell wrote in a note on Monday. They said a spike in interest rates and lower valuations reflecting the recession are needed before a sustained stock market rally can occur.

This week, traders will also look to the minutes from the Federal Reserve’s latest policy meeting for more clues on the course of rate hikes.

Atlanta Fed President Raphael Bostic said he favors a slower pace of interest rate hikes, with no more than a full percentage point of additional hikes, to try to secure a soft landing of the economy. Boston Fed President Susan Collins reiterated her view that options are open for the size of December’s interest rate hike, including the possibility of a 75 bp move. base.

Elsewhere, Hong Kong stocks led declines in Asia as investors wondered if the recent rally on a reopening of China was overdone. Cryptocurrency prices have struggled in the current crisis triggered by the downfall of Sam Bankman-Fried’s once mighty FTX empire. Crypto-exposed stocks fell.

Key events this week:

  • Chicago Fed National Activity Index in the United States, Monday

  • Richmond Fed U.S. Manufacturing Index, Tuesday

  • The OECD publishes its Economic Outlook on Tuesday

  • The Fed’s Loretta Mester and James Bullard speak, Tuesday

  • S&P Global PMIs: US, Eurozone, UK, Wednesday

  • U.S. MBA Mortgage Applications, Durable Goods, Initial Jobless Claims, University of Michigan Sentiment, New Home Sales, Wednesday

  • Minutes of the Federal Reserve’s Nov. 1-2 meeting, Wednesday

  • The ECB publishes the minutes of its October policy meeting on Thursday

  • US stock and bond markets are closed for the Thanksgiving holiday, Thursday

  • U.S. stock and bond markets close early on Friday

Some of the major movements in the markets:

Shares

  • S&P 500 futures fell 0.5% at 7:25 a.m. PT

  • Nasdaq 100 futures fell 0.8%

  • Dow Jones Industrial Average futures fell 0.2%

  • The Stoxx Europe 600 fell 0.2%

  • The MSCI World index fell 0.5%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.7%

  • The euro fell 0.9% to $1.0237

  • The British pound fell 0.8% to $1.1800

  • The Japanese yen fell 1.1% to 141.94 per dollar

Cryptocurrencies

  • Bitcoin fell 1.3% to $16,034.52

  • Ether fell 1.9% to $1,120.17

Obligations

  • The 10-year Treasury yield was little changed at 3.83%

  • The German 10-year rate rose one basis point to 2.03%

  • The UK 10-year yield rose two basis points to 3.26%

Goods

  • West Texas Intermediate crude fell 0.6% to $79.59 a barrel

  • Gold futures fell 0.8% to $1,755.10 an ounce

This story was produced with assistance from Bloomberg Automation.

–With the help of Tassia Sipahutar and Robert Brand.

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