Friday, January 21

Stocks and futures tumble as stagflation concern deepens: markets wind down


European equities and US index futures declined as concerns about slowing growth and persistently high inflation kept investors on the sidelines.

Contracts in the S&P 500 index fell 0.6% after the underlying indicator posted the biggest weekly loss since February. Aluminum iron ore rallied amid expectations of higher demand. Oil fell ahead of an OPEC + meeting to discuss production policy. Asian stocks fell as investors watched developments in China Evergrande Group, in debt.

Global markets have taken a downward turn in risk as the post-pandemic recovery stalls amid a supply shortage in everything from semiconductors to coffee. The growing energy crisis has added to concerns that high inflation will last longer than policy makers predict. The risks are multiplying at a time when investors are bracing for a gradual reduction from the Federal Reserve starting next month.

“The global shortage of chips and energy is getting worse, inflation is rising, the recovery may be slowing down and that puts central banks between a rock and a hard place,” wrote Ipek Ozkardeskaya, a senior analyst at Swissquote, in a note. “The best they could do is do nothing or tighten their monetary policy to avoid losing control of the economy.”

Oil futures posted losses on Monday as some traders speculated that the OPEC + alliance, led by Saudi Arabia and Russia, might have to consider increasing production in November by more than the expected 400,000 barrels per day. The West Texas Intermediate contract is still above $ 75 a barrel.

Treasury yields were stable, with the 10-year price below 1.47%. The dollar rose modestly after two days of losses.

In Europe, banks and automakers led losses in the benchmark Stoxx 600. Wm Morrison Supermarkets Plc fell 3.8% after CD&R emerged as the highest bidder for the British grocer, although analysts said that the terms of the offer resulting from the auction process were disappointing.

Shares in Japan and Hong Kong fell after Evergrande’s shares in Hong Kong, along with those of its property management division, were suspended amid reports of a unit stake sale. Mainland Chinese markets are closed until Thursday for the Golden Week holidays.

Asian investors await more news on Evergrande, which faces a maturing bond with little room for maneuver for payment. Hopson Development Holdings Ltd., whose shares were also suspended Monday morning, plans to acquire a 51% stake in the lender’s troubled property management unit for more than HK $ 40 billion ($ 5.1 billion). Cailian reported, citing unidentified people.

Here are some events to watch this week:

  • OPEC + meets virtually on Monday to review production policy amid a global energy crisis.
  • Reserve Bank of Australia policy decision on Tuesday
  • Rate decision in New Zealand on Wednesday
  • Reserve Bank of India monetary policy decision on Friday
  • US Department of Labor Releases Data on Unemployment and Job Creation on Friday
  • Annual Nobel announcements begin on Monday and the Peace Prize is awarded on Friday.

Some of the main movements in the markets:

Stocks

  • The Stoxx Europe 600 fell 0.6% at 8:37 am London time.
  • S&P 500 futures fell 0.6%
  • Nasdaq 100 futures fell 0.8%
  • Dow Jones Industrial Average futures fell 0.5%
  • The MSCI Asia Pacific Index fell 0.6%
  • The MSCI emerging markets index fell 0.6%

Currencies

  • Bloomberg’s dollar spot index rose 0.1%
  • The euro changed little to $ 1.1601
  • The Japanese yen changed little to 111.15 per dollar
  • The offshore yuan fell 0.3% to 6.4543 to the dollar.
  • The British pound changed little to $ 1.3542

Captivity

  • The 10-year Treasury yield advanced two basis points to 1.48%.
  • Germany’s 10-year yield changed little to -0.22%
  • UK 10-year yield advanced one basis point to 1.01%

Raw Materials

  • Brent crude fell 0.6% to $ 78.79 a barrel
  • Spot gold fell 0.4% to $ 1,753.78 an ounce

© 2021 Bloomberg


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