Stock sell-off to reignite in Asia after US slide

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(Sept 9): Asian stocks looked set to resume declines after heavy losses on Wall Street and worries that a Covid-19 vaccine could be delayed. The dollar and Treasuries climbed.

Futures dropped in Japan, Hong Kong and Australia, and S&P 500 contracts fell about 1% in early Asia trading amid concern progress at AstraZeneca Plc has stalled in the hunt for a coronavirus vaccine. The U.S. benchmark closed almost 3% lower Tuesday, and the Nasdaq 100 almost 5% as the selloff in U.S. technology shares picked up steam. Investors fled the high flyers that fueled a historic rally with Tesla suffering the worst rout in its history. Brent crude tumbled below $40 for the first time since June as a stalling consumption recovery in Asia and increased supply from OPEC+ signaled a bleak short-term outlook.

Investors are grappling with the recent market turbulence, assessing whether the pullback for equities is a sign of market health or the start of a larger drawdown that has further to go. For now, traders are seeking the safety of haven assets, pushing Treasury yields lower and strengthening the dollar.

“The path of least resistance for the market may well be to test the downside,” said Peter Chatwell, head of multi-asset strategy at Mizuho International Plc. “Ultimately, if there is more selloff, I suspect real money investors will take the opportunity to buy the dip.”

Meantime, investors are monitoring progress on fighting the pandemic. AstraZeneca has put on hold a phase 3 study testing a Covid-19 vaccine due to a suspected adverse reaction in a trial participant, STAT reported.

Here are some key events coming up:

  • The ECB will probably hold rates on Thursday but indicate that downside risks have intensified, suggesting further easing is possible before year-end.
  • U.S. CPI data is due Friday, with consumer prices expected to rise in August for a third straight month.

These are the main moves in markets:

Stocks

  • Futures on the S&P 500 slid 0.5% as of 7:01 a.m. in Tokyo. The S&P 500 fell 2.8% and the Nasdaq 100 dropped 4.8% on Tuesday.
  • Futures on Japan’s Nikkei 225 declined 0.7%.
  • Hang Seng futures dropped 0.6%.
  • Futures on Australia’s S&P/ASX 200 Index retreated 1.6%.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.5%.
  • The yen was at 105.94 per dollar, up 0.1%.
  • The offshore yuan traded at 6.8527 per dollar.
  • The euro bought US$1.1778.

Bonds

  • The yield on 10-year Treasuries declined four basis points to 0.68%.

Commodities

  • West Texas Intermediate crude retreated 0.2% to US$36.64 a barrel.
  • Gold was at US$1,932.23 an ounce.