Stocks Fall on China Covid Worries; Dollar rises: markets are reeling


(Bloomberg) — Stocks fell amid concerns that China could tighten Covid restrictions after a string of deaths and investors sought refuge in the dollar.

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S&P 500 and Nasdaq 100 contracts were down at least 0.5%. Walt Disney Co. defied the gloom, rallying in premarket trading in New York after a surprise move reinstated former leader Bob Iger as chief executive. European stocks fell.

The dollar rose against its G10 peers and emerging market currencies. Treasuries were flat after giving back earlier gains. Oil fell on concerns about weakening demand from China.

China saw its first Covid-related death in almost six months on Saturday, and two more were reported on Sunday. Worsening outbreaks across the country are raising concerns that authorities may again resort to stricter restrictions. Near Beijing, it suspended schools, closed universities and asked residents to stay at home for five days in what was rumored to be a test case for the end of virus restrictions.

“Financial markets cooled amid rising Covid cases in China and concerns that the re-tightening of restrictions will send a fresh ripple through manufacturing output and dampen demand for raw materials,” said Susannah Streeter, chief investment and market analyst at Hargreaves Lansdown. .

Goldman Sachs Group Inc. on stock forecast. Investors hoping for a better year in 2023 will be disappointed that the bear market phase is far from over, strategists said.

“Conditions that typically qualify for an equity hole have yet to materialize,” strategists including Peter Oppenheimer and Sharon Bell wrote in a note on Monday. They said that lower prices, reflecting the peak and recession in interest rates, are necessary before a sustained recovery in the stock market can occur.

Traders will also be looking to the minutes of the Federal Reserve’s latest meeting this week for more clues on the course of interest rate hikes.

Atlanta Fed President Raphael Bostic said he favors slowing the rate of interest rate hikes to no more than 1 percent to ensure a soft economic recovery. Boston Fed President Susan Collins reiterated her view that options are open for the size of a December interest rate hike, including the possibility of a move of 75 basis points.

Elsewhere, Hong Kong shares led declines in Asia as investors wondered whether the recent rally on China’s reopening was overblown. Cryptocurrency prices have struggled in the ongoing crisis caused by the collapse of Sam Bankman-Fried’s once-mighty FTX empire. Stocks exposed to crypto fell.

This week’s highlights:

  • US Chicago Fed national activity index, Monday

  • US Richmond Fed manufacturing index, Tuesday

  • The OECD released its Economic Outlook on Tuesday

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

  • S&P Global PMI: US, Eurozone, UK, Wednesday

  • US MBA mortgage applications, durable goods, initial jobless claims, University of Michigan sentiment, new home sales, Wednesday

  • Minutes of the Federal Reserve’s meeting on Wednesday, November 1-2

  • The ECB publishes an account of its Thursday, October policy meeting

  • US stock and bond markets are closed on Thursday for Thanksgiving

  • US stock and bond markets close early on Friday

Some of the major movements in the markets are:

Shares

  • S&P 500 futures were down 0.5% as of 6:02 a.m. New York time.

  • Nasdaq 100 futures fell 0.7%

  • Futures on the Dow Jones Industrial Average fell 0.2%

  • The Stoxx Europe 600 fell 0.1%

  • The MSCI World index fell 0.5%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.7%

  • The euro fell 0.8% to $1.0239

  • The British pound fell 0.6% to $1.1821

  • The exchange rate of the Japanese yen fell by 0.9% to 141.70 per $1

Cryptocurrencies

  • Bitcoin fell 0.9% to $16,110.71

  • Ether fell 1.1% to $1,128.49

Bonds

  • The 10-year Treasury yield was little changed at 3.83%

  • Germany’s 10-year yield was little changed at 2.02%

  • The UK 10-year yield was little changed at 3.24%

Commodity

  • West Texas Intermediate crude oil fell 0.5% to $79.70 a barrel

  • Gold futures fell 0.6% to $1,757.70 an ounce

This story was produced with assistance from Bloomberg Automation.

–With assistance from Sagarika Jaisinghani and Tassia Sipahutar.

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