Stocks Set for Cautious Open on China, Delta Risks: Markets Wrap

(Bloomberg) -- Asian stocks are set for a steady start Monday as investors await key Chinese data to gauge how the delta virus strain is impacting the recovery from the pandemic.

Futures fell in Japan and Australia but inched higher in Hong Kong, while U.S. contracts dipped. U.S. stocks eked out another record Friday but a drop in consumer sentiment to a near-decade low injected some caution, pushing down Treasury yields and the dollar.

China retail sales and industrial output numbers may show growth slowed in July amid mobility curbs to fight a virus outbreak and flooding. Investors are already unnerved by Beijing’s regulatory crackdown on private industries, and speculation is growing that officials could further ease monetary policy.

Geopolitical developments dominated over the weekend. In Afghanistan, Taliban leaders marched into Kabul on Sunday, preparing to take full control of the nation two decades after they were removed by the U.S. military. Canadian Prime Minister Justin Trudeau called an election for Sept. 20, and Malaysia’s Prime Minister Muhyiddin Yassin told his party he plans to resign on Monday.

Equities in the U.S. and Europe pushed on to all-time highs last week, bolstered by vaccine rollouts and ongoing stimulus support. But the fast-spreading delta variant and inflationary pressures remain risks. The virus is weighing more heavily on Asia, as the region struggles to accelerate inoculations. Covid-19 cases were at or near records in Thailand, Vietnam and the Philippines.

“Shares remain vulnerable to a short-term correction with possible triggers being the upswing in global coronavirus cases, the inflation scare and U.S. taper talk,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital.

Investors will be monitoring the Federal Open Market Committee’s latest minutes this week and a speech by Federal Reserve Chair Jerome Powell for more clues about the likely timeline for a tapering in the central bank’s $120 billion in monthly bond purchases.

Elsewhere, Bitcoin was trading around $47,000 and the total market value of cryptocurrencies was back above $2 trillion. Oil slipped.

Here are some events to watch this week:

• China releases July industrial output, retail sales data Monday
• U.S. Federal Reserve Chair Jerome Powell hosts a town hall discussion with educators Tuesday
• China’s top legislative body, the National People’s Congress Standing Committee, begins a four-day meeting in Beijing Tuesday
• U.S. retail sales are due Tuesday
• Reserve Bank of Australia minutes are scheduled to be released Tuesday
• Reserve Bank of New Zealand policy decision and briefing by Governor Adrian Orr Wednesday
• FOMC minutes released Wednesday
• Bank Indonesia rate decision and Governor Perry Warjiyo briefing Thursday

For more market analysis read our MLIV blog.

These are the main moves in markets:

Stocks

• S&P 500 futures fell 0.1% as of 7:11 a.m. in Tokyo. The S&P 500 rose 0.2% Friday
• Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.3%
• Nikkei 225 futures fell 0.5%
• Australia’s S&P/ASX 200 Index futures dipped 0.1%
• Hang Seng Index futures rose 0.1% earlier

Currencies

• The Japanese yen traded at 109.61 per dollar
• The offshore yuan was at 6.4782 per dollar
• The Bloomberg Dollar Spot Index fell 0.5% Friday
• The euro was at $1.1797

Bonds

• The yield on 10-year Treasuries declined eight basis points to 1.28%

Commodities

• West Texas Intermediate crude fell 0.3% to $68.21 a barrel
• Gold was at $1,778.97 an ounce

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