(Bloomberg) — US futures fluctuated as a rout in Chinese shares weighed on sentiment while investors await the next batch of earnings from some of the world’s biggest companies. Treasury yields dipped and the dollar gained.
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Contracts on the S&P 500 and Nasdaq 100 pulled back from session lows. US-listed Chinese stocks including Alibaba Group Holding Ltd. to JD.com Inc. tumbled in premarket trading, with investors spooked by President Xi Jinping’s tightening grip on China’s ruling party.
While the outlook for interest rates in the US and Europe remains at the center of investors’ attention, their focus this week will also be on earnings of megacap technology companies, among the key profit-growth engines for the S&P 500. The five biggest tech firms by revenue — Apple Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc. and Meta Platforms Inc. — are projected to report the steepest contraction in earnings in three years, data compiled by Bloomberg show.
“It’s clear demand is slowing but so far we’ve seen pockets of tech like software, cloud computing still being quite resilient,” said Laura Cooper, a senior investment strategist at BlackRock International Ltd., on Bloomberg TV. “We will be watching for any signs of cracks coming through that could put a dent to some of these earnings expectations.”
A gauge of dollar strength rose in choppy trading that saw wild swings in the yen amid signs of a second intervention from Japanese authorities in two sessions. British bonds rallied after Boris Johnson pulled out of the race to lead the UK’s ruling Conservative Party, putting former chancellor Rishi Sunak closer to becoming the next prime minister.
The Stoxx Europe 600 Index advanced. Media, travel and leisure and utilities rose, while energy underperformed as oil declined amid souring sentiment over China. The gauge pared some of its early advance after disappointing data added to concerns the euro area is heading for a recession. Prosus NV slumped more than 11%.
China’s yuan and the country’s stocks tumbled in Hong Kong to the lowest level since the depths of the 2008 global financial crisis even as economic growth data beat estimates. The onshore yuan depreciated as much as 0.4%, while the Hang Seng China Enterprises Index, a gauge of Chinese stocks listed in Hong Kong, plunged more than 5%.
“Market sentiment could remain cautious near-term on China, on concerns of a shift of focus toward more state control versus a market-driven approach under the new leadership team,” said Xiaojia Zhi, the chief China economist at Credit Agricole CIB. “The exit path from zero-Covid is not yet clear.”
Chinese economic data that was delayed last week and published Monday showed a mixed recovery, with unemployment rising and retail sales weakening despite a pickup in growth. Yet Xi’s Covid-zero campaign looks likely to continue to drag on the economy and there has been speculation that his “common prosperity” goal may even lead to property and inheritance taxes.
Key events this week:
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Earnings due this week include: Apple, Microsoft, Exxon Mobil, Ford Motor, Credit Suisse, Airbus, Alphabet, Amazon, Bank of China, Boeing, Caterpillar, Cnooc, Coca-Cola, HSBC, Intel, McDonald’s, Mercedes-Benz, Merck, Samsung Electronics, Shell, UBS, UPS, Vale, Visa, Volkswagen
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PMIs for US, Monday
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US Conference Board consumer confidence, Tuesday
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Bank of Canada rate decision, Wednesday
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ECB rate decision, Thursday
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US GDP, durable goods orders, initial jobless claims, Thursday
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Bank of Japan policy decision, Friday
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US personal income, personal spending, pending home sales, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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Futures on the S&P 500 were unchanged as of 6:06 a.m. New York time
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Futures on the Nasdaq 100 fell 0.2%
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Futures on the Dow Jones Industrial Average were little changed
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The Stoxx Europe 600 rose 1.1%
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The MSCI World index was little changed
Currencies
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The Bloomberg Dollar Spot Index rose 0.5%
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The euro fell 0.3% to $0.9832
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The British pound rose 0.3% to $1.1338
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The Japanese yen fell 1.2% to 149.41 per dollar
Cryptocurrencies
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Bitcoin fell 0.6% to $19,387.8
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Ether rose 1.2% to $1,346.65
Bonds
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The yield on 10-year Treasuries declined four basis points to 4.18%
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Germany’s 10-year yield declined five basis points to 2.36%
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Britain’s 10-year yield declined 19 basis points to 3.87%
Commodities
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West Texas Intermediate crude fell 1.5% to $83.76 a barrel
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Gold futures fell 0.2% to $1,653.30 an ounce
–With assistance from Charlotte Yang and Brett Miller.
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