(Bloomberg) -- Investor appetite soured, sending US equity futures and commodities lower after China affirmed its Covid-Zero policy stance. The dollar advanced against major currencies on its appeal as a haven asset.
Most Read from Bloomberg
Twitter Now Asks Some Fired Workers to Please Come Back
Putin’s Ukraine War Is Entering a Terrifying New Phase
Ukraine Latest: US and Russia Discussed Containing War, WSJ Says
Lawyer Suing Twitter Over Layoffs Says Musk Trying to Comply
Houston Mogul’s $75 Million Win on Astros Hits Caesars Hardest
The Australian and New Zealand dollars were the largest decliners among Group-of-10 currencies given their sensitivity to the outlook for Chinese economic growth. The offshore yuan weakened.
Contracts for the S&P 500 and Nasdaq 100 fell, as did European stock futures, after the shares on Wall Street snapped a four-day slide on Friday. Equities opened higher in Japan, South Korea and Australia, though the gains were more modest than futures had suggested earlier.
Oil slumped around 2%, leading falls in commodities on the prospect of weaker demand from China. Sentiment was further hurt by Apple Inc. projecting lower shipments of its newest iPhones than previously expected amid the impact of China lockdowns on operations at a supplier’s factory.
Expectations for a buoyant start to week were quashed on Saturday when Chinese officials vowed to remain “unswervingly” strict in Beijing’s approach to stamping out the coronavirus. The nation’s stocks had rallied aggressively on Friday on bets for an easing of virus curbs.
“Yes valuations for equities in China are extraordinarily low and very compelling,” George Boubouras, head of research at K2 Asset Management, said on Bloomberg Television. “It’s just there is too much risk associated with it.”
The jolt from China comes on top of headwinds from Federal Reserve interest-rate hikes. US data Friday -- showing strong hiring and wage increases along with higher unemployment -- offered a mixed picture for Fed officials debating how long to extend their campaign to curb elevated inflation.
Fed fund futures are leaning toward pricing a 50-basis-point hike in December, with the peak around 5.1% next year.
Wall Street’s fear gauge is well below the panic levels seen during the pandemic or the 2008 crisis, but volatility is very much a feature of 2022.
The advance in the dollar Monday follows its biggest drop since March 2020 on Friday in Bloomberg’s gauge of the currency. Treasuries were little changed in Asia after the two-year yield, which are more sensitive to imminent policy moves, reversed course and came down on Friday.
“Over the next three to four months, dollar will continue to keep moving higher,” Mahjabeen Zaman, head of FX research at Australia & New Zealand Banking Group Ltd., said on Bloomberg Television. “That’s really consistent with the recent FOMC Fed meeting we had where they said they’re going to slow the pace but push on peak rates.”
Markets will watch the latest US inflation reading on Thursday after the core consumer price index rose more than forecast to a 40-year high in September. Even if prices begin to moderate, the CPI is far above the Fed’s comfort zone.
Key events this week:
China trade, Monday
Fed officials Susan Collins, Loretta Mester and Tom Barkin speak at events, Monday
Euro zone retail sales, Tuesday
US midterm elections, Tuesday
EIA oil inventory report, Wednesday
China aggregate financing, PPI, CPI, money supply, new yuan loans, Wednesday
US wholesale inventories, MBA mortgage applications, Wednesday
Fed officials John Williams, Tom Barkin speak at events, Wednesday
US CPI, US initial jobless claims, Thursday
Fed officials Lorie Logan, Esther George, Loretta Mester speak at events, Thursday
US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
Futures on the S&P 500 fell 0.6% as of 9:39 a.m. Tokyo time. The S&P 500 rise 1.4% on Friday
Nasdaq 100 futures fell 0.7%. The Nasdaq 100 rose 1.6%
Euro Stoxx 50 futures fell 0.4%
Hang Seng futures rose 1.7%
The Topix Index rose 0.7%
The S&P ASX Index rose 0.3%
Currencies
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.3% to $0.9932
The Japanese yen fell 0.3% to 147.07 per dollar
The offshore yuan fell 0.6% to 7.2316 per dollar
The Australian dollar fell 0.6% to $0.6432
Cryptocurrencies
Bitcoin fell 1% to $20,925
Ether fell 1.8% to $1,575
Bonds
The yield on 10-year Treasuries was little changed at 4.16%
Australia’s 10-year yield advanced six basis points to 3.91%
Commodities
West Texas Intermediate crude fell 1.7% to $91.07 a barrel
Spot gold fell 0.6% to $1,672.61 an ounce
Most Read from Bloomberg Businessweek
El Salvador’s $300 Million Bitcoin ‘Revolution’ Is Failing Miserably
US Housing Hit by Spiraling Mortgage Rates as Inflation Persists
Yeezy Roller Coaster Ended With Two-Minute Phone Call at Adidas
Fast Fashion Waste Is Choking Developing Countries With Mountains of Trash
These Five Women Are Helping Doctors Crack the Long-Covid Mystery
©2022 Bloomberg L.P.
