Stocks Decline as Traders Weigh Risks to Reopening: Markets Wrap

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(Bloomberg) — Asian stocks Wednesday snapped an eight-day winning streak as a rally in Japan moderated and traders evaluated the risk of a slower recovery from the pandemic due to the delta virus variant.

Shares fell in Hong Kong and China, where the mouthpiece of China’s Communist Party ran an editorial seeking to ease concern that President Xi Jinping’s regulatory crackdown will hurt foreign investors. Equities climbed modestly in Japan, supported by hopes for economic stimulus from the next prime minister. U.S. futures were steady but European contracts retreated.

An investor exodus from China Evergrande Group deepened after its bond and stock ratings were cut further. The world’s most indebted developer has become one of the biggest financial worries in China. Warnings are also growing that Beijing’s campaign to cool its property market — a vital economic sector — may go too far.

A selloff across bond markets has intensified in part due to a flood of debt sales. The 10-year U.S. Treasury yield remained around 1.37%. Australian and New Zealand yields climbed. The dollar held a rally.

The prospect of a slower economic reopening and an eventual reduction in Federal Reserve and European Central Bank pandemic stimulus support is leading to some investor wariness. At the same time, global shares remain near all-time highs, indicating the jitters are relatively contained.

“Localized setbacks in combating the virus have the potential to contribute to market volatility and slow the economic rebound in selected countries,” Mark Haefele, chief investment officer for global wealth management at UBS Group AG, wrote in a note. “But we continue to see broad progress in curbing the pandemic and returning to economic normality.”

Elsewhere, Bitcoin nursed losses in the wake of El Salvador’s rocky implementation of a law that makes the cryptocurrency legal tender. In commodity markets, crude oil steadied after a two-day decline, while uranium added to a surge.

What to watch this week:

U.S. President Joe Biden will likely make his choice this week on whether to renominate Fed Chair Jerome Powell to a second termDallas Fed President Robert Kaplan holds a virtual town hall discussion WednesdayECB President Christine Lagarde holds a press conference after the bank’s rate decision ThursdayChina PPI, CPI, new yuan loans, money supply, aggregate financing, Thursday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.1% as of 6:25 a.m. in London. The S&P 500 fell 0.3%Nasdaq 100 futures were steady. The Nasdaq 100 rose 0.2%Japan’s Topix index rose 0.6%Australia’s S&P/ASX 200 Index slid 0.3%South Korea’s Kospi index dropped 0.8%Hong Kong’s Hang Seng Index fell 0.2%China’s Shanghai Composite Index lost 0.2%Euro Stoxx 50 futures retreated 0.1%

Currencies

The Bloomberg Dollar Spot Index was steadyThe euro was at $1.1841The Japanese yen was at 110.36 per dollarThe offshore yuan was at 6.4602 per dollar

Bonds

The yield on 10-year Treasuries was at 1.37%Australia’s 10-year yield rose four basis points to 1.30%

Commodities

West Texas Intermediate crude was at $68.59 a barrel, rising 0.4%Gold was at $1,797.78 an ounce, up 0.2%

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