U.S. Futures Climb as Selloff in Stocks Moderates: Markets Wrap

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(Bloomberg) — A selloff in stocks moderated in Asia on Tuesday as traders assessed risks from China’s crackdown on the real-estate sector and looked ahead to this week’s Federal Reserve meeting. Treasury yields edged up.

Japan fell after reopening following a holiday, while Hong Kong slipped but avoided a repeat of the property-led tumble from a day earlier. U.S. and European futures advanced, suggesting a degree of improvement in sentiment. Dip-buyers in the last hour of trading helped the S&P 500 pare some losses overnight, though the index still posted the biggest drop since May. 

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A Hong Kong gauge of real-estate firms steadied, after developers disputed a report of pressure from the Chinese government. China Evergrande Group slid deeper in equity and credit markets. Concerns remain about broader contagion after S&P Global Ratings said the developer is on the brink of default. China’s markets and those in South Korea remain closed for a holiday.

Treasuries pared an advance and the dollar dipped. Aside from worries over Evergrande’s ability to make good on $300 billion of liabilities, Wednesday’s Federal Reserve meeting also looms. Policy makers are expected to start laying the groundwork for paring stimulus.

China’s property-sector upheaval — part of President Xi Jinping’s broader clampdown on private industries under his “common prosperity” initiative to reduce inequality — is adding to the risks confronting investors. These include stretched equity valuations and slower economic reopening due to the delta virus strain amid price pressures stoked by commodities. Markets are also digesting an outlook of reduced central bank policy support.

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“Markets are clearly having some angst on the potential spillover effects from Evergrande, along with some nervousness over the September FOMC meeting,” said Cliff Hodge, chief investment officer at Cornerstone Wealth. “We’ve been in the camp that we’re overdue for a correction, something in the 5%-10% range that is a buyable pullback. At the moment, we’re not worried about a market crash. The Fed and Evergrande are not new.” 

Elsewhere, Bitcoin slid in volatile trading, tumbling as much as 7.6% before bouncing back to above $42,000. Oil pushed and higher gold slipped. 

In Canada, Prime Minister Justin Trudeau is poised to win a third term in a snap election but fall short of regaining a parliamentary majority. The nation’s currency was among the best performers in the Group-of-10 basket. 

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Here are key events to watch this week:

Bank of Japan rate decision, WednesdayFederal Reserve rate decision, WednesdayBank of England rate decision, ThursdayFed Chair Jerome Powell, Fed Governor Michelle Bowman and Vice Chairman Richard Clarida discuss pandemic recovery, Friday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:   

 Stocks

S&P 500 futures rose 0.5% as of 1:18 p.m. in Tokyo. The S&P 500 fell 1.7%Nasdaq 100 futures added 0.5%. The Nasdaq 100 fell 2.1%Japan’s Topix index fell 1.5%Australia’s S&P/ASX 200 Index rose 0.1%Hong Kong’s Hang Seng Index fell 0.3%Euro Stoxx 50 futures added 0.5%

Currencies

The Japanese yen traded at 109.61 per dollar, down 0.2%The offshore yuan was at 6.4749 per dollar, up 0.1%The Bloomberg Dollar Spot Index dipped 0.1%The euro was up 0.1% at $1.1734

Bonds

The yield on 10-year Treasuries was at 1.33%, up two basis pointsAustralia’s 10-year bond yield declined three basis points to 1.28%

Commodities

West Texas Intermediate crude was at $70.98 a barrel, up 1%Gold was at $1,761.84 an ounce

©2021 Bloomberg L.P.

Bloomberg.com

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