Stocks Fall on China Covid Concerns; Dollar Rises: Markets Wrap

(Bloomberg) — Stocks fell on concerns that China may tighten its Covid curbs after a spate of reported deaths, with investors seeking shelter in the dollar.

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The S&P 500 and Nasdaq 100 contracts both fell at least 0.5%. The Walt Disney Co. defied the gloom, rallying in New York premarket trading after the company brought back former executive Bob Iger as CEO in a surprise move. European shares fell.

The dollar climbed against its Group-of-10 counterparts and emerging market currencies. Government bonds were steady after giving back earlier gains. Oil fell on concerns about a weakened outlook for demand from China.

China saw its first Covid-related death in nearly six months on Saturday and two more were reported on Sunday. Worsening outbreaks across the country are raising concerns that the authorities may once again resort to harsh restrictions. A city near Beijing rumored to be a test case for lifting virus restrictions has suspended schools, closed universities and told residents to stay at home for five days.

“Financial markets have cooled amid concerns that rising Covid cases in China and a further tightening of restrictions will send another jolt through production and depress demand for commodities,”[ads1]; said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown .

As for the outlook for stocks, Goldman Sachs Group Inc. strategists said investors hoping for a better year in 2023 will be disappointed, with the bear market phase not yet over.

“The conditions typically consistent with an equity bottom have not yet been reached,” strategists including Peter Oppenheimer and Sharon Bell wrote in a note on Monday. They said a peak in interest rates and lower valuations reflecting a recession are needed before a sustained recovery in the stock market can occur.

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Traders this week will also look to minutes from the latest Federal Reserve policy meeting for more clues about the course of rate hikes.

Atlanta Fed President Raphael Bostic said he would prefer to slow the pace of rate hikes, with no more than 1 percentage point more increases, to try to ensure a soft landing for the economy. Boston Fed President Susan Collins reiterated her view that there are open options for the size of the December rate hike, including the possibility of a move of 75 basis points.

Elsewhere, shares in Hong Kong led declines in Asia as investors weighed whether the recent rally on a reopening in China was overblown. Cryptocurrency prices struggled in the ongoing crisis triggered by the demise of Sam Bankman-Fried’s once-mighty FTX empire. Crypto-exposed stocks fell.

Important events this week:

• The US Chicago Fed’s national activity index, Monday

• US Richmond Fed manufacturing index, Tuesday

• The OECD publishes the Economic Outlook on Tuesday

• Fed’s Loretta Mester and James Bullard speak Tuesday

• S&P Global PMI: US, Eurozone, UK, Wednesday

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

• Minutes from the Federal Reserve’s meeting 1.-2. November, Wednesday

• The ECB publishes an account of its policy meeting in October on Thursday

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

• The US stock and bond markets close early Friday

Some of the main features of markets:

Stock

• S&P 500 futures fell 0.5% at 06:02 New York time

• Futures on the Nasdaq 100 fell 0.7 percent

• Futures on the Dow Jones Industrial Average fell 0.2 percent

• Stoxx Europe 600 fell 0.1%

• The MSCI World index fell 0.5 percent

Currencies

• The Bloomberg Dollar Spot index rose 0.7 percent

• The euro fell 0.8% to $1.0239

• The British pound fell 0.6% to $1.1821

• The Japanese yen fell 0.9% to 141.70 per dollar

Cryptocurrencies

• Bitcoin fell 0.9% to $16,110.71

• Ether fell 1.1% to $1,128.49

Bonds

• The yield on 10-year government bonds was little changed at 3.83%

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

• UK 10-year yields were little changed at 3.24%

Raw materials

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

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

This story was produced with assistance from Bloomberg Automation.

–With assistance from Sagarika Jaisinghani and Tassia Sipahutar.

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