November 29, 2022

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Stocks Fall on China's Coronavirus Fears;  Dollar Gains: Markets Wrapped

Stocks Fall on China’s Coronavirus Fears; Dollar Gains: Markets Wrapped

(Bloomberg) — US stocks fell as fears mounted that China may tighten Covid restrictions after a spate of reported deaths. Concerns about the US growth outlook with the Federal Reserve pledging to continue fighting inflation continue to weigh on investors.

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The S&P 500 was affected by the technology and energy sectors. The Nasdaq 100 was pushed down by declines in Apple Inc. and Amazon.com Inc. and Tesla Inc.. The Walt Disney Co. defied the risk-off sentiment that swept the markets by bringing back former leader Bob Iger to replace his successor, Bob Chapek, as CEO.

Oil fell on fears of a weak demand outlook from China and on the news that Saudi Arabia is considering an OPEC+ increase of up to 500,000 barrels per day. The dollar rose as investors sought safe-haven assets. Treasury notes rose, with the 10-year yield around 3.78%.

China saw its first Covid-related death in nearly six months on Saturday and two more cases were reported on Sunday. And the worsening outbreak of the disease across the country fuels fears that the authorities may again resort to strict restrictions.

The weakness of the offshore yuan against the dollar on Monday is “the biggest negative macro factor price driver for the S&P 500,” said Charlie McCligott, managing director of cross-asset strategy at Nomura Securities International.

“This renewed strength of the dollar also contributes to a tightening of ‘US dollar liquidity’ and simultaneously serves as a headwind for US equities from the S&P 500 to Nasdaq to Russell,” he said.

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This week, traders will also look to the minutes from the latest Fed policy meeting for more clues on the path of rate hikes.

“For the Fed right now, if we get some deceleration in inflation — which it looks like we might do — but you don’t see that in services inflation deceleration, that’s related to a tight labor market,” Veronica Clark, economist at Citigroup, said on Monday. on Bloomberg TV. “You need to see this downturn in labor market data.”

Atlanta Federal Reserve Chairman Rafael Bostick said he favors slowing the pace of interest rate increases, with increases not going more than one percentage point, in an effort to ensure a soft landing in the economy. Boston Fed Chair Susan Collins reiterated her view that options are open for the size of the December rate hike, including the possibility of a 75 basis point move.

Main events this week:

  • US Richmond Fed Manufacturing Index, Tuesday

  • The Organization for Economic Co-operation and Development releases economic forecasts, Tuesday

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

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

  • US Mortgage Applications, Durable Goods, Initial Jobless Claims, University of Michigan Sentiment, New Home Sales, Wednesday

  • Minutes of the Federal Reserve meeting on November 1 and 2, Wednesday

  • The European Central Bank publishes a report on its October policy meeting, Thursday

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

  • US stock and bond markets close early on Friday

Some of the major movements in the markets:

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Stores

  • The S&P 500 is down 0.6% as of 10:56 a.m. New York time.

  • The Nasdaq 100 fell 0.9%.

  • The Dow Jones Industrial Average fell 0.3%.

  • The Stoxx Europe 600 hasn’t changed a bit

  • The MSCI World Index rose 0.6%.

currencies

  • The Bloomberg Spot Dollar Index rose 0.7%.

  • The euro fell 0.8 percent to $1.0245

  • The British pound fell 0.8 percent to $1.1789

  • The Japanese yen fell 1% to 141.82 per dollar

Digital currencies

  • Bitcoin fell 0.8% to $16,119.66

  • Ether fell 1% to $1,130.09

bonds

  • The yield on the 10-year Treasury fell by four basis points, to 3.78%.

  • Germany’s 10-year yield fell four basis points to 1.98%.

  • The yield on the 10-year British Bund fell seven basis points to 3.17%.

goods

  • West Texas Intermediate crude fell 5.7 percent to $75.55 a barrel

  • Gold futures fell 0.9 percent to $1,753.90 an ounce

This story was produced with help from Bloomberg Automation.

— With assistance from Peyton Forte and Isabelle Lee.

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