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European equities slip after drops in China and Hong Kong

Equities updates

A stock sell-off that began in Asia eased in the European trading session on Tuesday with traders looking ahead to a batch of key economic events in the US scheduled for later in the day.

The regionwide Stoxx 600 was down 0.5 per cent in morning trading. France’s Cac 40 and Germany’s Dax both fell around 0.5 per cent. London’s FTSE 100 was little changed, helped by a rally in shares of mining heavyweight BHP Group.

The muted trading in Europe came after a choppy session in Asia, in which Hong Kong’s Hang Seng shed 1.7 per cent and China’s CSI 300 dropped 2.1 per cent. Stocks of automotive company Geely and tech giants Tencent and Alibaba were among the biggest fallers in Hong Kong, all shedding at least 3 per cent of their price.

Meanwhile, the New Zealand dollar slumped 1.4 per cent against the US dollar to $0.6921 after prime minister Jacinda Ardern announced a three-day lockdown after detecting the first community spread of coronavirus since February.

The market jitters in Asia highlight the growing unease among some traders and investors over slowing growth in China and the spread of the Delta variant of coronavirus.

Still, many global markets remain near all-time highs, with the US S&P 500 having now doubled from the closing low it hit during the market turmoil of March 2020.

A report later on Tuesday covering US retail sales is expected to provide a fresh look on the extent to which the spread of coronavirus has affected US consumption, which accounts for around 70 per cent of overall output. Economists polled by Bloomberg expect retail sales to have fallen 0.3 per cent in July from June, dragged down by supply issues in the auto sector. However, a core reading is also forecast to have fallen around 0.2 per cent.

The data follow a survey from the University of Michigan that showed consumer sentiment cooled sharply early this month.

Federal Reserve chair Jay Powell will also be giving a town hall late on Tuesday, which will be closely watched by investors keen to have some insight into the central bank’s thinking on monetary policy.

“What makes Powell’s voice so relevant . . . is that his statements generally reflect the consensus within the [Federal Open Market Committee],” said Thu Lan Nguyen, currency analyst at Commerzbank. “Powell may provide a somewhat clearer direction on tapering today.”

Yields on US 10-year Treasuries, which move inversely to price, fell 0.04 percentage points on Tuesday to 1.22 per cent, extending a recent dip. Nevertheless, they remain up in the year to date, compared with 2020’s final close of 0.912 per cent.

Index futures tracking the S&P 500 were down 0.4 per cent, while those which follow the tech-focused Nasdaq were trading 0.3 per cent lower.

Oil prices continued to track lower, as concerns over spikes in the Delta variant of coronavirus hit demand. Brent crude, the global benchmark, was down 0.6 per cent at $69.08 a barrel. The US benchmark, West Texas Intermediate, fell 0.59 per cent to $66.89 a barrel.

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