U.S. Shares Retreat, European Shares end Little-Changed

Major U.S. indexes were lower, pulling back from earlier gains but still close to all-time highs.

The Dow Jones Industrial Average fell 133.74 points, or 0.38%, to 34,897.33, the S&P 500 lost 14.45 points, or 0.32%, to 4,499.62 and the Nasdaq Composite dropped 4.28 points, or 0.03%, to 15,282.36 by mid afternoon.

Federal Reserve Bank Governor Michelle Bowman added her voice Wednesday to the growing number of policymakers who say the weak August jobs report likely won’t throw off the central bank’s plan to trim its $120 billion in monthly bond purchases later this year.

Earlier in the day, U.S. data showed the number of Americans filing new claims for jobless benefits fell to the lowest level in nearly 18 months last week, offering more evidence that job growth was being hindered by labor shortages rather than cooling demand for workers.

After falling as much as 0.9% in morning trade, the pan-European STOXX 600 index ended largely unchanged around 467.57 points. The index had shed 1.5% over the past two days on fears of a more-hawkish-than-expected ECB.

Euro zone bonds yields tumbled as the European Central Bank took its first tentative step in withdrawing COVID-era stimulus. Southern Europe led a fall in euro zone sovereign bond yields.

The euro rose 0.15% against the dollar, climbing for the first time in four sessions, while bond markets cheered by sending French 10-yields negative again.

“We’re seeing some modest weakness mainly because the market is just in flux. There is no real clarity on when we will start to see the Fed and ECB start to pull back stimulus,” said Edward Moya, a senior market analyst with OANDA in New York.

Instead of hinting at any potential end date for its pandemic-era purchase programme, European Central Bank President Christine Lagarde instead channelled the spirit of former British Prime Minister Margaret Thatcher, saying: “The lady isn’t tapering.”

Germany’s 10-year yield, the benchmark for the bloc, fell. [GVD/EUR]

FRAGILE CHINA

MSCI’s benchmark for global equity markets fell 0.33% to 740.33. Emerging markets stocks fell 1.18%.

The UK’s FTSE 100 dropped 1% with low-cost airline easyJet tumbling over 10% as it tapped shareholders for 1.2 billion pounds ($1.7 billion). [.EU]

MSCI’s broadest index of Asia-Pacific shares ended down 1%, which was its worst daily performance since Aug. 19, the last time markets decided they were worried about the U.S. Federal Reserve tapering its massive asset purchase programme.

Chinese tech giants Tencent, NetEase and Alibaba had slumped 8.5%, 11% and 6% respectively after online gaming chiefs were summoned by authorities to check they are sticking to strict new rules for the sector.

“The global story is looking soft and it’s being hit by the Delta variant plus concern about potentially the Fed still moving towards a taper,” said Rob Carnell, Asia head of research at ING. “It’s an unsettling combination of things.”

The China angst had meant Hong Kong, where many heavyweight Chinese firms are also listed, shed 2.3%.

News that Chinese authorities had told gaming firms to resolutely curb incorrect tendencies such as focusing “only on money” and “only on traffic” had hurt companies with large gaming operations. Tencent fell 8.5%, Bilibili lost nearly 9% and NetEase slumped 11%.

There was more turbulence too for the country’s most indebted property giant, Evergrande.

Media reports the company would suspend some interest payments on loans and payments to its wealth management products sent its shares down more than 10% at one point, although they recovered almost half of the drop on news that some creditors had agreed to loan payment extensions.

Korea’s Kospi fell 1.5%, also under pressure from regulatory scrutiny of local tech players. In Korea’s case, fintech names such as Kakao Corp , which sank 7.2%, and Naver Corp, down 6.9%, were in the spotlight.

Australian stocks lost nearly 2% after payrolls data showed a sharp drop in jobs in the first half of August.

Gold steadied in choppy trading, buoyed by a slight retreat in the dollar. Spot bullion prices were up 0.4%.

Oil prices fell on China’s plan to tap state reserves and a smaller-than-expected drawdown in U.S. crude supplies.

Brent crude was last down $1.14, or down 1.57%, at $71.46 a barrel. U.S. crude was last down $1.16, or down 1.66% at %68.15.

($1 = 0.7246 pounds)

(Additional reporting by Alun John in Hong Kong; Editing by Carmel Crimmins and Nick Zieminski)

Stocks Charge Ahead on U.S. Data, Dollar Eases Ahead

Economic data from Asia and Europe was largely disappointing but the Labor Department report showed the number of Americans filing new claims for jobless benefits fell last week to a pandemic-era low.

The decline in layoffs to their lowest in more than 24 years helped ease concerns about the state of the U.S. economy even if the closely watched employment report for August on Friday shows a slowdown in nonfarm payrolls growth.

MSCI’s all-country world index climbed to a new peak, while the S&P 500 and Nasdaq also set new intraday highs. Energy-led value, up about 0.44%, outpaced a 0.09% decline in growth as Microsoft and Facebook fell, the latest twist in an ever-changing market leadership.

“We don’t really have anything that you can hang your hat on and say this is where we’re going, this is the sector that I need to be involved in,” said JJ Kinahan, chief market strategist at TD Ameritrade.

“You’re going to continue to see this back-and-forth type of trade,” he said.

MSCI’s world stock index, which measures equity performance in 50 countries, rose 0.19% after paring earlier gains, and was still on track to post its fifth consecutive closing high.

On Wall Street, the Dow Jones Industrial Average rose 0.23%, the S&P 500 added 0.16% and the Nasdaq Composite advanced 0.07%.

Overnight in Asia, uncertainty over still-low vaccination rates in many economies and China’s zero-tolerance COVID-19 strategy kept Chinese blue-chips flat, though speculation about more fiscal stimulus offered some support.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.16%. Japan’s Nikkei added 0.3%, South Korea fell 1%, whereas Hong Kong’s battered tech index enjoyed a fourth day of unbroken gains.

The euro traded near a one-month high versus the greenback after German central bank chief Jens Weidmann cautioned against inflation risks and urged slowing the European Central Bank’s bond buying.

Also on Wednesday, ECB President Christine Lagarde said the euro zone economy was recovering and only needed “surgical” support targeted at sectors that still struggle.

The euro was up 0.27% at $1.1869.

The hawkish comments were in contrast to the Bank of Japan, which has shown no sign of tapering its massive purchases as the economy remains mired in a decades-long battle with deflation.

The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.262% to 92.247. The yen last traded down 0.02% at $109.9700.

U.S. Treasury yields drifted lower as the market remained on hold ahead of the government’s closely watched employment data on Friday, which could break yields out of a tight range.

The benchmark 10-year yield fell 0.7 basis points to yield 1.295%.

Aluminium prices rose to a 10-year high on growing concerns that restrictions on Chinese production of the metal are causing supply shortages.

Oil rose more than $1, supported by optimism about the pace of the economic recovery from the pandemic, a sharp decline in U.S. crude stocks and a weaker dollar.

Brent crude settled up $1.44 at $73.03 a barrel. U.S. crude rose $1.40 to settle at $69.99 a barrel.

U.S. gold futures settled down 0.3% at $1,811.50 an ounce.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Sujata Rao in London; Editing by Catherine Evans, Nick Tattersall and Sonya Hepinstall)

Marketmind: Peak Inflation?

A look at the day ahead from Tommy Wilkes.

Wednesday’s 0.5% reading for the consumer price index in July was the largest drop in month-to-month inflation in 15 months and has some investors starting to bet long-feared inflation on the back of pandemic-era stimulus may be peaking. U.S. Treasury yields fell, erasing some of this month’s surge.

The reading certainly eases pressure on the Federal Reserve by supporting its assertion than inflation rises are temporary and gives the central bank more time to decide when to taper asset purchases. It also gives ammunition to bulls determined to push stocks higher.

On Thursday markets looked set to take a breather, with both U.S. and European stock futures flat or down slightly.

U.S. 10-year Treasury yields held above 1.3% — while inflation fears may be receding for now, the benchmark yield is still nearly 20 basis points higher than in early August.

Elsewhere, data showed that Britain’s economy grew by a faster-than expected 1.0% in June, boosted by the huge services sector.

The mood in Asia, where stocks have underperformed U.S. and European peers recently, was downbeat again after China said it would draft new laws on national security, technology innovation, monopolies and education, as well as in areas involving foreigners — the latest regulatory crackdown.

Fears about the spread of the COVID-19 Delta variant in Asia have also sapped confidence, with stocks lower on Thursday.

In currency markets, the dollar recouped some of Wednesday’s tumble after the lower inflation reading.

Oil prices mostly held gains from earlier in the week, with Brent firmly above $71 a barrel and U.S. crude at $69.

In corporate news, German online takeaway food firm Delivery Hero raised its 2021 outlook after more than doubling quarterly revenues.

Aviva Investors said it would return at least 4 billion pounds ($5.5 billion) to shareholders after a rise in profits — the latest European firm to return to buybacks.

Key developments that should provide more direction to markets on Thursday:

– Emerging markets: Mexico, Turkey, Serbia,  Philippines, Peru central banks meet

– U.S. PPI/initial jobless claims data

– Auctions: 4-week T-bills, 30-year Treasuries

– U.S. earnings: Baidu, Walt Disney, Uber

– European earnings: Deutsche Telekom. Henkel, freenet. TUI, RWE, Aviva, Cineworld

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Tommy Wilkes; Editing by Dhara Ranasinghe)

Stocks Hit Record Highs as Fed Tapering Concerns Ease

The data showed tentative signs inflation had peaked as supply-chain disruptions work their way through the U.S. economy.

“This is a more moderate reading than expected, especially on the core,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.

Speculation is growing that Fed Chair Jerome Powell will signal timings on tapering stimulus at a meeting of central bankers in Jackson Hole, Wyoming, on Aug. 26-28.

Stronger-than-expected inflation data may have fueled talk of an imminent slowing of the Fed’s bond purchases, said Craig Erlam, senior market analyst at OANDA Europe.

“Instead, we can all breathe a little easier, albeit safe in the knowledge that tapering is still coming and it’s likely to be announced next month,” he said.

U.S. nonfarm payrolls figures due in September could also influence tapering if they are particularly strong.

The MSCI all-country index, a gauge of stocks across the globe, hit a record high and was last trading up 0.29%.

The Dow Jones Industrial Average and S&P500 both closed at record highs, with sentiment boosted by U.S. lawmakers approving a trillion-dollar infrastructure package on Tuesday.

The Dow Jones Industrial Average rose 220.23 points, or 0.62%, to 35,484.9, the S&P 500 gained 11.02 points, or 0.25%, to 4,447.77 and the Nasdaq Composite dropped 22.95 points, or 0.16%, to 14,765.14.

European shares also hit record highs, clocking their longest winning streak in two months. The STOXX 600 index rose 0.4% to hit an all-time high for an eighth consecutive session.

OIL GAINS, TREASURY YIELDS FALL

Oil gained on Wednesday, changing course after the Biden administration said it would not call on U.S. producers to increase crude output, and that efforts to increase OPEC production were a longer-range plan.

U.S. crude oil futures settled at $69.25 per barrel, up 96 cents or 1.41%. Brent crude futures settled at $71.44 per barrel, up 81 cents or 1.15%.

U.S. Treasury yields fell in choppy trading, following a strong 10-year note auction; 10-year yields fell from four-week peaks earlier in the session.

Benchmark 10-year notes rose 4/32 in price to yield 1.3287%, down from 1.342% late on Tuesday.

The dollar index fell 0.198%, with the euro up 0.2% to $1.1742.

Gold prices jumped following the inflation data.

U.S. gold futures settled up 1.2% at $1,753.30.

Spot gold added 1.4% to $1,752.25 an ounce. U.S. gold futures gained 1.26% to $1,750.50 an ounce.

Asian shares had slipped as fears about further waves of the coronavirus dampened a positive lead from Tuesday’s record close on Wall Street.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.3%.

The Delta variant of the new coronavirus is spreading quickly in many Asian countries, raising fears about local restrictions on travel and other activity damaging the economic recovery.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Matt Scuffham; additional reporting by Lindsay Dunsmuir in Washington; editing by Mark Heinrich, Nick Zieminski and Jonathan Oatis)

Asian Stocks Stumble on China Tech Worries

By Kevin Buckland

The region’s biggest markets, Japan and China, both declined. The Nikkei fell 0.6% following a surge in COVID-19 infections in Tokyo, just weeks before the city hosts the Olympics. [.T]

Chinese tech firms slumped amid concerns over Beijing’s crackdown on ride-hailing giant Didi Global and scrutiny of other platform companies in the country.

That pushed Chinese blue chips down 0.4% and Hong Kong’s Hang Seng 0.8% lower, weighing on MSCI’s broadest index of Asia-Pacific shares outside Japan, which swung into negative territory. [.SS]

Taiwan shares were a standout, rallying 1.2%, while South Korea’s Kospi added 0.3%.

Trading was thinner than usual with U.S. markets closed for the extended 4th of July weekend, meaning “price action might be choppy,” and markets may be “trading on their own regional idiosyncrasies rather than a macro thematic,” said Kyle Rodda, a market analyst at IG in Melbourne.

“But given Friday’s nonfarm payrolls numbers, things are still really, really optimistic, and I think you’ll start to see that come through again as the week unfolds,” Rodda said.

“Conditions are right for equities to continue to push higher right across the globe.”

The MSCI All Country World index closed at a record 724.66 last week, and edged slightly higher on Monday despite Asian headwinds.

European equity futures pointed to minor gains, with Euro Stoxx 50 futures marginally higher, while FTSE futures rose 0.1%.

S&P 500 futures signalled a 0.2% dip for Tuesday’s open, after the index closed 0.8% higher at a record on Friday. The Dow Jones Industrial Average rose 0.4% and the Nasdaq Composite added 0.8% to also hit a record. [.N]

U.S. nonfarm payrolls increased by a bigger-than-expected 850,000 jobs last month. But the unemployment rate unexpectedly ticked up to 5.9% from 5.8%, while the closely watched average hourly earnings, a gauge of wage inflation, rose 0.3% last month, lower than the consensus forecast for a 0.4% increase.

“The goldilocks print suggests there is no need to accelerate the tapering timeline or the implied rate hike profile,” Tapas Strickland, an analyst at National Australia Bank, wrote in a client note.

“Overall the level of payrolls is still 6.8 million below pre-pandemic February 2020 levels and is still below the level of substantial progress needed by the Fed. As such there is nothing in this report for the Fed to become hawkish about.”

Eyes will be trained on the minutes of the Federal Open Markets Committee meeting from last month, when policymakers surprised markets by signalling two rate hikes by the end of 2023.

Commentary by Fed officials since then has been more balanced, particularly from Chair Jerome Powell, and investors parse Wednesday’s release for further clues on the timing of policy tightening.

The dollar was mostly flat on Monday after dropping from a three-month high at the end of last week, pressured by the weaker details of the U.S. payrolls report.

The greenback was 0.1% stronger at 111.110 yen, and gained slightly to $1.18615 per euro.

Gold edged down 0.1% to $1,785.03 an ounce.

Crude oil was rangebound as OPEC+ talks dragged on. Saudi Arabia’s energy minister pushed back on Sunday against opposition by fellow Gulf producer the United Arab Emirates to a proposed OPEC+ deal and called for “compromise and rationality” to secure agreement when the group reconvenes on Monday.

Brent crude added 7 cents to $76.24 a barrel, and U.S. crude lost 4 cents to $75.20 a barrel. [O/R]

(Editing by Sam Holmes)

Asian Shares Strike Cautious Tone as Covid-19 Cases Spike

By Swati Pandey

MSCI’s broadest index of Asia-Pacific shares outside Japan was last a shade weaker at 702.57. Japan’s Nikkei slipped 0.2%, with South Korea’s benchmark KOSPI down about the same amount.

Investors were concerned about a spike in coronavirus infections in Asia, with Australia’s most populous city of Sydney plunging into a lockdown after a cluster of cases involving the highly contagious Delta strain ballooned.

Indonesia is battling record high cases while a lockdown in Malaysia is set to be extended. Thailand too announced new restrictions in Bangkok and other provinces.

Chinese shares were a touch higher with the CSI300 index up 0.2%. Data over the weekend showed profit growth at China’s industrial firms slowed again in May as surging raw material prices squeezed margins and weighed on factory activity.

Investors will keep a close eye on an official survey of Chinese factory activity due Wednesday. The manufacturing reading is expected to slow to 50.8 from 51. The private sector Caixin Manufacturing PMI will follow later in the week.

Futures pointed to a cautious open for share markets in Europe as well. Pan-region Euro Stoxx 50 futures slipped 0.05%, while FTSE futures edged 0.01% higher.

S&P 500 futures added 0.05%.

Global shares weakened about 0.1% after reaching record highs last week as weaker-than-expected U.S. inflation and news of a bipartisan U.S. infrastructure agreement boosted risk appetite.

The infrastructure plan is valued at $1.2 trillion over eight years, of which $579 billion is new spending.

“Investors are keenly watching the progress of U.S. President Biden’s bipartisan infrastructure deal through congress. The package could boost demand significantly, driven by investment in renewables and electronic vehicle (EV) infrastructure,” ANZ analysts wrote in a note.

Oil prices slipped slightly after earlier climbing to their highest since October 2018 on expectations demand growth will outstrip supply and OPEC+ will be cautious in returning more crude to the market from August.

Brent futures lost 8 cents to $76.10 a barrel, while U.S. crude was flat at $74.05.

On Friday, the S&P 500 rose 2.7% for the week, its strongest weekly gain since early February after data showed a measure of underlying inflation rose less than expected in May, easing fears of a sudden tapering in stimulus by the Federal Reserve.

The Dow climbed 0.7% while the tech-heavy Nasdaq dropped 0.06% after holding near the previous session’s record high.

Later in the week, a closely-watched U.S. jobs report will be released for June which could point to strong labour demand.

Yields for benchmark 10-year U.S. Treasuries, jumped back above 1.50% to close out a week in which rates notched their largest gains since March.

Monetary and fiscal stimulus around the world in response to the COVID-19 pandemic is boosting financial assets, despite an uneven pace of recovery between regions.

Boston Federal Reserve Bank President Eric Rosengren on Friday warned a build-up of financial stability risks linked to a low interest rate environment could lead to another downturn that interrupts the labour market recovery and impedes a return to maximum employment.

In currencies, the U.S. dollar was slightly firmer at 91.856 against a basket of other currencies.

The euro eased to $1.19225, while the Japanese yen strengthened to 110.625 versus the greenback.

(Reporting by Swati Pandey. Additional reporting by Kevin Buckland; Editing by Shri Navaratnam and Jacqueline Wong)