(Bloomberg) — U.S. stock-index futures fell and European stocks slumped as investors assessed multiplying economic risks including a resurgent pandemic and China’s regulatory crackdown.
Contracts on the S&P 500 Index lost 0.3% as money managers from Morgan Stanley to Citigroup turned cautious on U.S. equities. Europe’s Stoxx 600 gauge declined the most in almost three weeks. Treasury yields slid and the dollar extended a rally. Cryptocurrency-exposed stocks dropped in premarket trading as a selloff in Bitcoin deepened.
Many investors have begun to see relative U.S. valuations as excessive even as growth in the rest of the world suffers from renewed lockdowns and travel curbs. They doubt the world is ready for an eventual tapering of central-bank stimulus even as inflation accelerates due to supply shocks. End-of-year seasonality and valuation concerns add to the gloomy mood.
“It appears that U.S. markets are concerned about the hoped-for post-pandemic recovery being somewhat less exuberant than hoped — a cold reality that places such as ASEAN and Australia have already had to accept,” Jeffrey Halley, a senior strategist at Oanda Asia Pacific Pte, wrote in a note. “That K-shaped recovery becoming more K-shaped.”
Morgan Stanley cut U.S. stocks to underweight and global equities to equal-weight, citing “outsized risks” to growth through October. Extremely bullish positioning means corrections can be amplified, Citigroup said. Credit Suisse Group AG said it has a small underweight on the U.S. market.
In Europe, growth concerns were compounded by speculation the European Central Bank is getting ready to slow down emergency stimulus. EQT AB slumped 4% in Stockholm after partners in the private equity firm sold a part of their holdings earlier than expected.
Meanwhile, the continued spread of Covid-19 is curbing economic activity around the world. The Philippines backtracked on easing curbs in the capital region, while Japan may extend state of emergency orders. Taiwan identified a delta variant outbreak in New Taipei City.
Equities climbed an eighth day in Japan, supported by hopes for economic stimulus from the next prime minister. Pakistan’s stocks benchmark slid to the lowest since May after MSCI downgraded the country to a frontier market from an emerging market.
Bitcoin nursed losses in the wake of El Salvador’s rocky implementation of a law that makes the cryptocurrency legal tender. Coinbase Global Inc. dropped 2.9% after the U.S. markets regulator warned the company against launching a product that would allow consumers to earn interest on their crypto holdings.
Investors will be watching uranium-exposed stocks, especially Cameco Corp. which has rallied 34% in seven days amid the commodity’s surge.
What to watch this week:
U.S. President Joe Biden will likely make his choice this week on whether to renominate Fed Chair Jerome Powell to a second termDallas Fed President Robert Kaplan holds a virtual town hall discussion WednesdayECB President Christine Lagarde holds a press conference after the bank’s rate decision ThursdayChina PPI, CPI, new yuan loans, money supply, aggregate financing, Thursday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 1.3% as of 10:04 a.m. London timeFutures on the S&P 500 fell 0.3%Futures on the Nasdaq 100 fell 0.2%Futures on the Dow Jones Industrial Average fell 0.4%The MSCI Asia Pacific Index was little changedThe MSCI Emerging Markets Index fell 0.4%
Currencies
The Bloomberg Dollar Spot Index was little changedThe euro fell 0.1% to $1.1827The Japanese yen rose 0.1% to 110.16 per dollarThe offshore yuan was little changed at 6.4564 per dollarThe British pound fell 0.1% to $1.3767
Bonds
The yield on 10-year Treasuries declined two basis points to 1.35%Germany’s 10-year yield declined one basis point to -0.33%Britain’s 10-year yield was little changed at 0.73%
Commodities
Brent crude rose 0.3% to $71.92 a barrelSpot gold rose 0.3% to $1,798.95 an ounce
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