WORLD MARKET IN SKEPTIC MOOD
World shares tapped the brakes on Thursday as China troubles struck again, while Europe’s bond markets steadied after confident-sounding ECB policymakers had caused their sharpest selloff in six months. Meanwhile, US stock futures traded slightly lower on Thursday, as investors were uncertain regarding Fed's plans for tapering.
Early in the month, investors were expecting the Fed to start reducing stimulus this year but such bets eased during the week amid weak US economic data including flash PMIs and consumer sentiment and concerns over the coronavirus Delta variant. Virtual Jackson Hole Symposium starts tomorrow and investors are awaiting Fed Chair Powell's speech. Among single stocks, Salesforce reported fiscal second-quarter earnings and forward guidance that exceeded analysts’ estimates, with $1.48 earnings per share on $6.34 billion revenue. On Wednesday, the Dow Jones rose 39.24 points, or 0.1%, to 35,405. The S&P 500 gained 0.2% to a new closing peak of 4,496. The Nasdaq Composite edged up 0.1% to 15,0412, also a new closing high. Meanwhile European shares fell on Thursday. DWS Group tumbled 9% on a report US authorities were investigating German lender Deutsche Bank's asset management arm over sustainability claims. The pan-European STOXX 600 index was down 0.4%, with mining, travel and leisure and retail stocks among the biggest losers. The return of risk aversion steadied euro zone government bond yields ahead of European Central Bank meeting minutes later in the day.
Asia had seen its first post-COVID outbreak interest rise in South Korea overnight. Chinese markets had tumbled after the country’s most indebted property developer Evergrande warned of a 39% slump in profits, Japan suspended Moderna’s COVID vaccine, while the mood of Germany’s consumers was darkening again.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.65%, and U.S. stock futures the S&P 500 e-minis, shed 0.15%.Chinese bluechips had fallen 2% and Hong Kong ended down 1%, as a tech rally ran out of steam. The Hang Seng Tech Index, where many of the big Chinese tech firms are listed, fell 1.9%.Evergrande’s profit warning sent its shares down 7% and the shares of its electric vehicle unit tumbling nearly 20%. Elsewhere, the Australian benchmark lost 0.5% as the country’s new daily coronavirus cases topped 1,000 for the first time. Japan’s Nikkei ended little changed as the government kept its economic forecasts broadly unchanged.
The global inflationary pulse was also in the headlines as the South Korean central bank lifted its base rate off a record low, the first major economy in Asia to do so. Governor Lee Ju-yeol maintained his hawkish tone and suggested the bank could further tighten policy as data showed Asia’s fourth-largest economy was overheating. <,/p>
Central banks around the world are laying the groundwork for a transition away from crisis-era stimulus as what began as emergency support now overheats many economies. Investors and policymakers are particularly focused on what Fed Chair Jeremy Powell signals at Jackson Hole on Friday. Treasury yields inched down in Asia but were rising again in Europe. The yield on benchmark 10-year Treasuries was last 1.35% compared with 1.33% in late Asian trading. The dollar was edging up too, sitting 0.1% higher at 1.1757 per euro and buying 110.16 Japanese yen.
In commodity markets, oil prices fell after three days of gains, with Brent crude down 0.9% at $71.56 per barrel and U.S. crude dipped 1.2% to $67.5 a barrel. Gold and iron dipped 0.3% and 0.8% respectively in metals markets.
