Asian stocks to drop, banks in focus; US dollar jumps

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(Sept 22): Asian stocks are set to open weaker on Tuesday after U.S. equities ended lower on concerns over prospects for economic stimulus and coronavirus restrictions. Bonds and the dollar rose.

Banks will be in the spotlight after global lenders tumbled on a report about suspicious worldwide transactions. Futures fell in Australia and Hong Kong. S&P 500 Index futures opened little changed. After approaching the threshold that many investors consider to be a market correction, the S&P 500 came off session lows. The Nasdaq 100 climbed. The dollar rose the most in three months against its major peers. Japan is shut for a holiday and cash Treasuries won’t trade until the London open.

The eruption of a partisan battle over replacing Supreme Court Justice Ruth Bader Ginsburg damaged already-slim prospects for another round of fiscal stimulus, rattling investors. Speaker Nancy Pelosi and House Democrats released a stopgap government funding bill without support from the White House or Senate Republicans. Federal Reserve Chairman Jerome Powell said the economy is improving, but has a long way to go before a full recovery from the pandemic.

“Valuations were getting more and more stretched and folks were looking the other way in the context of undeniable Fed support and the view that the U.S. government was going to top off the loss of income during the pandemic,” Macro Risk Advisors Founder and Chief Executive Officer Dean Curnutt said in Bloomberg Television. “There is concern that this uncertainty around the election is going to stay with us for a period after the election.”

On the pandemic front, former Food and Drug Administration Commissioner Scott Gottlieb warned the U.S. may experience “at least one more cycle” of the virus in the fall and winter. The U.K. will announce new restrictions on bars and restaurants.

Meanwhile, a new investigation by the International Consortium of Investigative Journalists said some big global banks “kept profiting from powerful and dangerous players” in the past two decades even after the U.S. imposed penalties. HSBC Holdings Plc’s shares fell to the lowest since 1995 in Hong Kong.

Elsewhere, oil bounced from its biggest decline in almost two weeks on mounting worries over prolonged coronavirus restrictions and supply concerns.

These are some events to watch this week:

  • Fed Chairman Jerome Powell appears before the House Select Subcommittee on the Coronavirus to discuss the central bank’s response on Wednesday.
  • New Zealand rate decision on Wednesday.
  • U.S. initial jobless claims are due Thursday.

These are some of the main moves in markets:

Stocks

  • S&P 500 futures were flat as of 8:05 a.m. in Sydney. The S&P 500 dipped 1.2%.
  • Australia’s S&P/ASX 200 Index futures fell 1%.
  • Hong Kong’s Hang Seng Index futures lost 0.4% earlier.

Currencies

  • The yen was at 104.68 per dollar.
  • The offshore yuan traded at 6.7976 per dollar.
  • The Bloomberg Dollar Spot Index jumped 0.6%.
  • The euro traded at US$1.1769 after sinking 0.7%.

Bonds

  • The yield on 10-year Treasuries dipped almost three basis points to 0.67%.

Commodities

  • West Texas Intermediate crude rose 1% to US$39.72 a barrel. It dropped 3.7% earlier.
  • Gold was at US$1,914.46 an ounce after depreciating 2%.