Stocks Skid on Tech as Policy Tightening Saps Mood: Markets Wrap
Stocks fell Friday amid a drop in technology shares as tightening monetary policy buffets sentiment, while economic risks from the omicron virus variant helped to sustain demand for Treasuries.
MSCI Inc.’s Asia-Pacific index was down for the fifth session in six, with Chinese tech stocks sliding more than 2%. U.S. and European equity futures were in the red after the Nasdaq 100 sank the most since September. The Federal Reserve’s pivot toward reducing outsized stimulus has sapped investor ardor for the more richly valued tech plays that dominate the U.S. gauge.
The 10-year Treasury yield held a decline from U.S. hours. Continued demand for Treasuries potentially reflects worries that the fast-spreading omicron strain will spark curbs that dim the economic outlook.
The dollar flirted with a third-straight weekly drop. In Turkey, the lira touched an all-time low. Oil retreated for the first time in three days and Bitcoin fell below $48,000.
Central banks globally are prioritizing the fight against elevated inflation by tightening monetary settings, while also keeping a wary eye on the impact of omicron. That backdrop has investors questioning whether global stocks are due for a rougher patch after almost doubling from pandemic lows.
“The cycle you are seeing here is really about a change in tone, a change in regime, the possibility of tighter policy next year, not just at the Fed, but globally,” Alicia Levine, head of equities and capital markets advisory at BNY Mellon Wealth Management, said on Bloomberg Television.
Central Banks
The Bank of England unexpectedly raised interest rates on Thursday, sending the pound higher. The European Central Bank temporarily boosted regular monthly bond buying for half a year to smooth the exit from crisis stimulus.
The Federal Reserve this week doubled the pace at which it tapers bond purchases and projected three quarter-point rate increases in 2022, another three in 2023 and two more in 2024.
Japan’s monetary authority Friday lengthened its cautious withdrawal from emergency pandemic aid in a move that contrasts with the urgency of other major central banks winding back stimulus.
Elsewhere, Senate Democratic leaders failed to break a deadlock over President Joe Biden’s $2 trillion economic agenda, punting action on the tax and spending bill to January in a political blow to the White House.
U.S.-China Tension
But the Senate did pass legislation that would ban goods from China’s Xinjiang region unless companies prove they weren’t made with forced labor. The Biden administration also added 34 Chinese targets to its banned-entity list, keeping tension with Beijing on the boil.
In the latest U.S. data, applications for state unemployment benefits rose last week but remained near the lowest levels of the pandemic as the labor market recovery continues. U.S. housing starts strengthened in November to the fastest pace in eight months, while output at factories advanced solidly.
Omicron continues to spread. Biden warned that unvaccinated Americans face “a winter of severe illness and death,” while Japanese Prime Minister Fumio Kishida asked Pfizer Inc. for faster delivery of vaccines.
Here are some key events this week:
- Bank of Japan monetary policy decision, Friday.
- S&P Dow Jones Indices quarterly rebalance effective after markets close, Friday.
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.2% as of 7 a.m. in London. The S&P 500 fell 0.9%
- Nasdaq 100 futures shed 0.4%. The Nasdaq 100 fell 2.6%
- Japan’s Topix index fell 1.4%
- South Korea’s Kospi rose 0.4%
- Australia’s S&P/ASX 200 index rose 0.1%
- Hong Kong’s Hang Seng index shed 1.2%
- China’s Shanghai Composite index fell 1.1%
- Euro Stoxx 50 futures declined 0.9%
Currencies
- The Bloomberg Dollar Spot Index was steady
- The euro was at $1.1335
- The Japanese yen was at 113.55 per dollar, up 0.1%
- The offshore yuan was at 6.3771 per dollar
Bonds
- The yield on 10-year Treasuries was at 1.41%
- Australia’s 10-year bond yield rose two basis points to 1.59%