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US, European stock futures fall; dollar climbs: markets wrap

Shares dropped in Japan but rose modestly in China and South Korea.
Image: Kiyoshi Ota/Bloomberg

US and European equity futures fell and Asian stocks were mixed Wednesday amid concern about the impact of the worsening pandemic on economic activity in some parts of the world. The dollar advanced.

S&P 500 futures retreated and European contracts were down about 2%. Shares dropped in Japan but rose modestly in China and South Korea. Microsoft Corp. shares slipped in extended trading as a forecast for revenue in some divisions fell short of the highest analysts’ projections.

China’s yuan was steady as traders digested news that the nation’s banks abandoned inclusion of a key factor used to calculate the currency’s daily reference rate. Treasury yields held steady while the yen strengthened.

Volatility remains elevated as the possibility of a US stimulus package before next week’s election fades, and as analysts warn against assuming that Joe Biden will beat President Donald Trump. Meanwhile, investors mulled a US consumer confidence report that came in worse than forecast Tuesday. Data showed Covid-19 hospitalisations rose at least 10% in the past week in 32 states and the nation’s capital.

“We’ve been warning investors over the last few days in particular to maybe pare back a little bit of their strong risk position,” Laura Fitzsimmons, JPMorgan Australia’s executive director of macro sales, said on Bloomberg TV. “As you see the odds start to wane a little bit more for Biden, maybe that continues a bit more. We all remember four years ago when markets were very much surprised.”

In China, indicators tracked by Bloomberg showed the recovery continued to display mixed signals while remaining broadly steady in October. In Europe, Germany’s Chancellor Angela Merkel proposed closing bars and restaurants for a month amid tougher restrictions across the continent, which is grappling with a resurgent virus outbreak.

Elsewhere, oil retreated back below $39 a barrel after an industry report pointed to a bigger-than-expected increase in US crude stockpiles.

These are some events to watch this week:

  • The Chinese Communist Party’s Central Committee holds its all-important plenum, where it’s expected to chart the course for the economy’s development for the next 15 years. Through October 29.
  • Brexit negotiating teams have started intense daily talks, and these are likely to continue as both sides push to finalise a deal by the middle of November.
  • Bank of Japan and the European Central Bank have monetary policy decisions Thursday, followed by briefings from Governor Kuroda and President Lagarde.
  • The first reading of US third-quarter GDP Thursday is anticipated to be the strongest on record following a record dive in the prior quarter as many businesses were shuttered by the pandemic.

Here are the main moves in markets:

Stocks

  • S&P 500 futures declined 0.6% as of 7:07 a.m. in London. The gauge fell 0.3% on Tuesday.
  • Japan’s Topix index fell 0.3%.
  • Hong Kong’s Hang Seng was little changed.
  • Shanghai Composite rose 0.5%.
  • Australia’s S&P/ASX 200 Index rose 0.1%.
  • Euro Stoxx 50 futures retreated 1.8%.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.1%.
  • The yen gained 0.2% to 104.18 per dollar.
  • The offshore yuan was steady at 6.7125 per dollar.
  • The euro fell 0.2% to $1.1776.

Bonds

  • The yield on 10-year Treasuries was at 0.76%.
  • Australia’s 10-year yield fell two basis points to 0.78%.

Commodities

  • West Texas Intermediate crude declined 2.6% to $38.56 a barrel.
  • Gold was little changed at $1,906.63 an ounce.
© 2020 Bloomberg

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