Stocks eye steady start in shadow of China curbs

Stocks eye steady start in shadow of China curbs
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(Aug 2): Asian stocks look set for a steady start as traders weigh China’s tightening grip over a range of industries and potential reopening disruption from the delta Covid-19 strain.

Futures rose in Japan and Australia Monday but dipped in Hong Kong. Beijing is pushing ahead with a crackdown on everything from technology to private education and property, leading the U.S. Securities and Exchange Commission to halt initial public offerings of Chinese firms pending better risk disclosures. Its Chinese counterpart called for more communication to find a resolution.

U.S. equity contracts climbed after Wall Street fell Friday, with Amazon.com Inc. sliding amid concern earnings growth at technology companies has peaked. Ten-year U.S. Treasury yields slipped back toward 1.20%. Investors are debating whether that signals a slower phase of the recovery from the pandemic and a tougher period for markets.

Global stocks in July completed their longest winning streak since 2018 but the pace of gains was the slowest in the six-month winning stretch, sapped by the implications of Beijing’s clampdown and concerns about the economic outlook due to high inflation and the spread of the delta variant. Minneapolis Fed President Neel Kashkari said Sunday the Covid-19 strain could keep some Americans from looking for work, potentially harming the U.S. recovery.

“Shares remain at risk of a short-term correction or volatility as coronavirus cases rise globally, the inflation scare continues and as we come into seasonally weaker months, but surging company profits in the U.S. and lower bond yields are providing support,” Shane Oliver, head of investment strategy and chief economist at AMP Capital, said in a note.

Traders will be keenly scrutinizing U.S. jobs data due this week after Fed officials signaled that further labor market progress is one of the keys to determining the timeframe for an eventual tapering in substantial stimulus support. Separately, a $550 billion infrastructure package is getting closer to passage in the Senate this week.

In the latest on the virus, Anthony Fauci, the U.S.’s top infectious disease doctor, said Covid-19 vaccines work extremely well and that a return to the lockdowns of 2020 is unlikely.

Crude oil traded near $74 a barrel as concerns about the delta variant’s impact on fuel demand eased amid tight global supplies. Bitcoin slipped back toward $40,000 after reaching the highest price since mid-May around $41,000 on the weekend.

Here are some key events to watch this week:

  • Among earnings this week, Alibaba, BP, HSBC, Toyota, Uber, Roku, Moderna, KKR
  • China Caixin manufacturing PMI due Monday
  • Reserve Bank of Australia policy decision Tuesday
  • Bank of England is expected to keep its benchmark interest rate and its bond-buying target unchanged Thursday
  • Reserve Bank of India monetary policy decision, briefing Friday
  • Reserve Bank of Australia Governor Philip Lowe gives testimony to a Parliament committee Friday
  • The U.S. jobs report is expected to show another robust month of hiring Friday

Here are the main moves in the markets:

Stocks

  • S&P 500 contracts rose 0.4% as of 7:52 a.m. in Tokyo. The S&P 500 fell 0.5%
  • Nasdaq 100 futures added 0.4%. The Nasdaq 100 fell 0.6%
  • Nikkei 225 futures rose 0.4%
  • Australia’s S&P/ASX 200 Index futures rose 0.5%
  • Hang Seng Index futures fell 0.2% earlier

Currencies

  • The Japanese yen traded at 109.71 per dollar
  • The offshore yuan was at 6.4649 per dollar
  • The Bloomberg Dollar Spot Index was little changed
  • The euro traded at US$1.1869

Bonds

  • The yield on 10-year Treasuries declined five basis points to 1.22% Friday

Commodities

  • West Texas Intermediate crude was at US$73.82 a barrel
  • Gold was at US$1,814.20 an ounce