Stocks and US equity futures fall on Tuesday, as traders focused on the risks that rising energy costs will keep inflation elevated and signs of a widening regulatory scrutiny by China.
European equities slumped at the open, with cyclical industries including banks, auto-parts manufacturers and miners faring the worst. Futures on the S&P 500 and Nasdaq 100 fell less than 0.5%. MSCI Inc’s Asia-Pacific index snapped a three-day climb amid news that China is expanding its crackdown to banks.
Oil held above $80 a barrel amid a power crisis from Europe to Asia. China’s thermal coal futures surged to a record for a second day. The energy crunch is squeezing supplies
of aluminum, whose price hit a 13-year high.
“With commodity prices seeing another spike and inflation concerns resurfacing, investors moved to price in a more hawkish central bank reaction,”
according to Deutsche Bank AG strategist Jim Reid.
Global markets are struggling to shake off worries that inflation — spurred by an energy crunch and pandemic-related supply-chain snarls — will sap company profits and economic expansion. Financial firms this week will kick off the third-quarter earnings season, heralding a key test of investor confidence.
Upcoming reports on the US consumer-price index and retail sales will help inform expectations about the likely timeline for Federal Reserve tapering and any eventual rate hikes.
Elsewhere, a rally in Bitcoin paused at about $57,000 level.
US benchmark Treasury yields and dollar were steady.
The Stoxx Europe 600 falls 0.6% as of 8:43 am London time and futures on the S&P 500 also drop 0.4%.
While futures on the Nasdaq 100 fall 0.3%, futures on the Dow Jones Industrial Average also drop 0.4%. The MSCI Asia Pacific Index slumps 0.9% and the MSCI Emerging Markets Index falls 1.1%.
While the Bloomberg Dollar Spot Index was little changed, the euro was little changed at $1.1561 and the Japanese yen was little changed at 113.22 per dollar. The offshore yuan was little changed at 6.4600 per dollar and the British pound was also little changed at $1.3596.
The yield on 10-year Treasuries was little changed at 1.60% and Germany’s 10-year yield was little changed at -0.13%. Britain’s 10-year yield declined one basis point to 1.18%
Brent crude was little changed and spot gold rises 0.3% to $1,759.25 an ounce.
Alibaba scores 24%
winning streak as low valuation lures buyers
Alibaba Group Holding Ltd’s strong share price recovery hit a pause on Tuesday on concerns of rising bond yields, reversing some of the 24% gain in the last four sessions.
The stock falls as much as 5.2% in Hong Kong, contributing the most to the losses in the Hang Seng Index, which slid 1.4%. There may be a potential tailwind for bond yields to increase further on expectations of more persistent inflationary pressures, which may weigh on tech, according to IG Asia.
The stock had surged since hitting a record low in Hong Kong on October 5, after having “gotten very cheap,” according to James Cordwell, an analyst at Atlantic Equities LLP. Alibaba trades at 17 times forward earnings estimates, compared with a multiple of 24 for Tencent Holdings Ltd and 38 for JD.com Inc. Tencent shares have gained 7% since a week ago.
A regulatory fine on Chinese food delivery giant Meituan “led to some speculation that we are getting towards the end of some of the regulatory scrutiny
the sector has been facing,”
The e-commerce giant has no sell ratings, with 36 out of 38 analysts giving it a buy, according to Bloomberg-compiled data. They forecast shares to rise 51% over the next 12 months versus a 32% and 20% gain for Tencent and Meituan, respectively.
The short-selling volume on its Hong Kong-listed shares hit the highest since January on Monday before retreating on Tuesday.