Stocks Eye Mixed Start as China Tempers U.S. Boost: Markets Wrap

Andreea Papuc
·3 min read

(Bloomberg) -- Stocks are set for a mixed start Monday as traders weigh a U.S. rally spurred by corporate earnings, China’s technology-sector crackdown and an upcoming Federal Reserve meeting. The dollar was steady.

Equity futures rose in Japan and Australia but slid in Hong Kong, where an index offering exposure to China’s internet giants is now the world’s worst-performing major tech gauge. Beijing’s latest tightening is a reform of its $100 billion education tech sector, undermining one of China’s hottest investment plays in recent years.

U.S. stocks closed Friday at a record and the S&P 500 has almost doubled from the depths of the pandemic. About 87% of the S&P 500 firms reporting results so far this season have beaten estimates. U.S. equity contracts fluctuated.

Treasuries were little changed Friday but traders are braced for possible turbulence as Fed officials resume talks at this week’s two-day policy meeting on when and how to taper stimulus. Treasury market volatility has jumped on economic risks from the spread of the contagious delta variant of Covid-19.

Investors have taken heart from a spectacular U.S. earnings season but concerns about inflation and the delta strain linger, portending bouts of volatility. The outlook for the Fed’s $120 billion in monthly bond purchases also remains key: economists surveyed by Bloomberg expect the central bank to start scaling back asset purchases next year and to raise interest rates at a quicker pace through 2024 than previously thought.

Read more: Whipsawed Bond Traders Hunker Down for the Return of the Fed

“The macro narrative remains one of a post-pandemic recovery,” Chris Iggo, chief investment officer for core investments at AXA Investment Managers, wrote in a note. Still, “continued pandemic risk is likely to be a recurring source of ‘risk-off’ events in the financial markets,” he added.

U.S.-China tension is on the radar too. The two sides hold their first high-level talks since March, with Deputy Secretary of State Wendy Sherman, the U.S.’s No. 2 diplomat, set to meet Foreign Minister Wang Yi on Monday.

Elsewhere, Bitcoin traded above $34,500, continuing a recent rally. Crude oil was just above $72 a barrel.

Here are some key events to watch this week:

Tesla, Alphabet, Apple, Facebook, Amazon report earnings this weekHigh-level U.S.-China talks due MondayFederal Reserve policy meeting concludes WednesdayU.S. GDP data are due Thursday

These are some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 7:01 a.m. in Tokyo. The S&P 500 rose 1%Nasdaq 100 futures were steady. The Nasdaq 100 climbed 1.2%Nikkei 225 futures rose 0.2%Australia’s S&P/ASX 200 futures increased 0.3%Hang Seng Index futures fell 0.8% earlier

Currencies

The Japanese yen was at 110.54 per dollarThe offshore yuan was at 6.4757 per dollarThe Bloomberg Dollar Spot Index was little changed FridayThe euro was little changed at $1.1772

Bonds

The yield on 10-year Treasuries was little changed at 1.28% Friday

Commodities

West Texas Intermediate crude rose 0.2% to $72.19 a barrelGold was at $1,802.34 an ounce

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