Stocks Drop in China on Covid Concern; Dollar Rising: Markets Wrapped

(Bloomberg) — Stocks fell on concerns that China may tighten Covid restrictions after a spate of reported deaths, with investors looking for refuge in the dollar.

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The Standard & Poor’s 500 and Nasdaq 100 contracts fell by at least 0.5%. Walt Disney Co. defied the gloom, rebounding in pre-market trading in New York after the company brought back former chief Bob Iger as CEO in a surprise move. European stocks fell.

The dollar rose against its G10 peers and emerging market currencies. Treasuries were flat after giving up previous gains. Oil fell on fears of a weak demand outlook from China.

China saw its first Covid-related death in nearly six months on Saturday and two more cases were reported on Sunday. And the worsening outbreak of the disease across the country fuels fears that the authorities may again resort to strict restrictions. A city near Beijing that was rumored to be a test case to end virus restrictions has suspended schools, closed universities and asked residents to stay home for five days.

“Financial markets have gone cold on fears that rising Covid cases in China and new tightening of restrictions will send a new jolt through industrial production and drive down demand for raw materials,” said Susanna Streeter, senior investment and markets analyst at Hargreaves Lansdown. .

Regarding the stock outlook, strategists at Goldman Sachs Group Inc. said: Investors hoping for a better year in 2023 will be disappointed, as the bear market phase is not over yet.

“The conditions that usually correspond to stock lows have not been reached,” strategists including Peter Oppenheimer and Sharon Bell wrote in a note on Monday. They said higher interest rates and lower valuations reflecting recession were necessary before any sustained recovery in the stock market could occur.

This week, traders will also look to the minutes from the latest Fed policy meeting for more clues on the path of rate hikes.

Atlanta Federal Reserve Chairman Rafael Bostick said he favors slowing the pace of interest rate increases, with increases not going more than one percentage point, in an effort to ensure a soft landing in the economy. Boston Fed Chair Susan Collins reiterated her view that options are open for the size of the December rate hike, including the possibility of a 75 basis point move.

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

Main events this week:

  • US Federal Reserve Bank of Chicago National Activity Index, Monday

  • US Richmond Fed Manufacturing Index, Tuesday

  • The Organization for Economic Co-operation and Development releases economic forecasts, Tuesday

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

  • S&P Global PMIs: US, Eurozone, UK, Wed

  • US Mortgage Applications, Durable Goods, Initial Jobless Claims, University of Michigan Sentiment, New Home Sales, Wednesday

  • Minutes of the Federal Reserve meeting on November 1 and 2, Wednesday

  • The European Central Bank publishes a report on its October policy meeting, Thursday

  • US stock and bond markets are closed for the Thanksgiving holiday, Thursday

  • US stock and bond markets close early on Friday

Some of the major movements in the markets:

Stores

  • 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%.

  • MSCI World Index fell 0.5%

currencies

  • The Bloomberg Spot Dollar Index rose 0.7%.

  • The euro fell 0.8 percent to $1.0239

  • The British pound fell 0.6 percent to $1.1821

  • The Japanese yen fell 0.9 percent to 141.70 per dollar

Digital currencies

  • Bitcoin fell 0.9 percent to $16,110.71

  • Ether fell 1.1% to $1,128.49

bonds

  • The yield on the 10-year Treasury note was little changed at 3.83%.

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

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

goods

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

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

This story was produced with help from Bloomberg Automation.

— With assistance from Sagarika Jaisinghani and Tassia Sipahutar.

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