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Stocks Extend Drop, Bonds Firm on Growth Concerns

Business Maverick

Business Maverick

Stocks Extend Drop, Bonds Firm on Growth Concerns

An electronic ticker is displayed outside the Philippine Stock Exchange (PSE) in Bonifacio Global City (BGC), Metro Manila, the Philippines, on Monday, July 2, 2018. The Philippine Stock Exchange Index tumbled 9.9 percent in the second quarter, buffeted by a weakening peso, quickening inflation, and the brewing trade war between the U.S. and China, not to mention the general selloff in emerging markets. Photographer: Carlo Gabuco/Bloomberg
By Bloomberg
09 Jul 2021 0

Asian shares followed U.S. equities lower Friday on growing anxiety that the spread of Covid-19 variants could hamper the global economic recovery. Treasuries trimmed a rally and the dollar edged up.

MSCI Inc.’s Asia-Pacific stock gauge tumbled to the lowest since mid-May with equities retreating from Japan to Australia. Economically sensitive sectors such as industrials and materials led the index lower. A Hong Kong gauge of Chinese stocks is on track for a bear market as Beijing clamps down on the tech sector. U.S. equity futures fell after the S&P 500 and Nasdaq 100 dipped from records.

Treasuries pared an overnight advance but the 10-year yield is still on course for one of its biggest weekly slides since June last year. At one point in U.S. hours the 30-year Treasury yield broke below 1.90% for the first time since February.

Oil headed for its biggest weekly loss since April. Bitcoin is again in the lower part of a trading range, emblematic of a reduced ardor for speculative investments like cryptocurrencies and meme stocks.

Ten-year yield momentum gauge hits levels last seen in March 2020

A key question now is whether investors will stick with the pandemic-era mantra of buying dips in risk assets, or interpret the bond-market rally as sign of a tougher economic outlook as the more infectious delta virus strain complicates the global reopening.

“Reflation requires not only the continual increase in growth, there’s a fiscal component to it and we’re seeing how hard it is to get some of that fiscal impulse to carry through,” said Marvin Loh, global macro strategist at State Street Corp. “Monetary policy continues to drive a lot of the excess growth, and we know what that story looks like, which is lower yields.”

Meanwhile, tension between the U.S. and China continues to bubble. Washington will add at least 10 Chinese entities to its economic blacklist as early as Friday over alleged human rights abuses and high-tech surveillance in Xinjiang, according to a report.

On the virus front, Pfizer Inc. plans to request U.S. emergency authorization in August for a third booster dose of its Covid-19 vaccine and said it’s confident it will be effective against the more-virulent delta variant.

Here are some events to watch this week:

  • The Group of 20 finance ministers and central bankers meet in Venice on Friday
  • China PPI and CPI data released on Friday

These are some of the main moves in markets:

Stocks

  • S&P 500 futures were down 0.2% as of 12:05 p.m. in Tokyo. The S&P 500 dropped 0.9%
  • Nasdaq 100 futures fell 0.2%. The Nasdaq 100 slipped 0.6%
  • Japan’s Topix index retreated 2%
  • Australia’s S&P/ASX 200 index lost 1.4%
  • South Korea’s Kospi index shed 1.7%
  • Hong Kong’s Hang Seng index added 0.6%
  • China’s Shanghai Composite index fell 0.4%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.1%
  • The euro traded at $1.1837
  • The British pound was at $1.3774
  • The Japanese yen was at 109.93 per dollar

Bonds

  • The yield on 10-year Treasuries rose two basis points to 1.32%
  • Australia’s 10-year bond yield rose one basis point to 1.33%

Commodities

  • West Texas Intermediate crude was at $73.07 a barrel
  • Gold was at $1,805.66 an ounce, up 0.2%

–With assistance from Claire Ballentine and Natalia Kniazhevich.

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