U.S. Stock Futures Drop as Hong Kong Spoils Mood: Markets Wrap

Bloomberg.- U.S. equity futures reversed an advance on Monday alongside European stocks as mounting unrest in Hong Kong weighed on investor sentiment. Treasuries and the yen extended gains while gold and the dollar both turned higher.

Contracts for all three main U.S. equity indexes retreated after Hong Kong airport authorities canceled remaining flights for the day. A Chinese official said the city was at a “critical juncture” and that there were signs of “terrorism.” The change in mood wiped out the Stoxx Europe 600 Index’s jump of as much as 1%. Stocks had earlier increased in Shanghai and edged higher in South Korea and Sydney, though Hong Kong shares dropped, and many other markets across Asia were shut for a holiday.

The yen extended its rally for a fourth day, while the offshore yuan fluctuated as China’s central bank fixing continued to signal its determination to manage an orderly depreciation. Italian bonds led gains in European debt after Fitch affirmed the country’s credit rating on Friday. The pound strengthened following three sessions of declines.

Monday’s reversals provided another reminder of the fragile mood across markets as it extended the tumultuous start to August. Gains for the safest government bonds show lingering caution by traders who’ve increased bets for central bank easing in recent weeks, as the U.S. and China escalate their trade war and a slew of global data point to slowing growth.

“We remain cautious, as we believe that a number of challenges remain,” said Andrew Sheets, chief cross asset strategist at Morgan Stanley in London. “Among them, the risk that high policy expectations make disappointment more likely, and that even if those aggressive expectations are met, easing isn’t expected to improve growth or inflation materially.”

Elsewhere, Argentina’s euro-denominated bonds slid after President Mauricio Macri’s poor showing in primary elections on Sunday. Emerging-market currencies weakened, led by the Mexican peso. Australia’s dollar extended losses amid the disruptions in Hong Kong.

Here are some key events coming up:

  • Companies releasing results include China’s Tencent, JD.com and Alibaba, Cisco, Brazilian utility Eletrobras, the U.K.’s Prudential, Australia’s Telstra, giant retailer Walmart, Nvidia, Swisscom and the Danish brewer Carlsberg.
  • The U.S. consumer price index, out Tuesday, probably picked up to a 1.7% annual pace in July, according to economist estimates. Core prices, which exclude food and energy, are seen rising 2.1%.
  • Wednesday brings data on China retail sales, industrial production and the jobless rate.
  • Thursday sees the release of U.S. jobless claims, industrial production and retail sales data.

These are the main moves in markets:

Stocks

  • Futures on the S&P 500 Index fell 0.5% as of 8:37 a.m. New York time.
  • The Stoxx Europe 600 Index dipped 0.2%.
  • The MSCI Asia Pacific Index decreased less than 0.05%.
  • Hong Kong’s Hang Seng Index declined 0.4%.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.1%.
  • The onshore yuan increased 0.1%.
  • The euro climbed less than 0.05% to $1.1204.
  • The Japanese yen strengthened 0.5% to 105.16 per dollar.
  • The British pound gained 0.5% to $1.2091.

Bonds

  • The yield on 10-year Treasuries fell six basis points to 1.69%.
  • Britain’s 10-year yield increased one basis point to 0.495%.
  • The spread of Italy’s 10-year bonds over Germany’s declined five basis points to 2.33 percentage points.
  • Germany’s 10-year yield decreased one basis point to -0.59%.

Commodities

  • Gold rose 0.5% to $1,504.69 an ounce.
  • West Texas Intermediate crude dipped 0.4% to $54.27 a barrel.
  • LME aluminum climbed 0.3%.
  • LME nickel gained 0.5% to $15,630 per metric ton.

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