European Stock Futures Fall as China’s Rally Halts: Markets Wrap

(Bloomberg) — European stocks are poised to decline, tracking weakness in Asian equities as a world-beating rally in Chinese shares paused. Oil extended gains amid concern over escalating tensions in the Middle East.

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Futures on the Euro Stoxx 50 index fell 0.4%, while those on US shares declined 0.2%. A gauge of Chinese shares in Hong Kong dropped 1.6%, snapping a 13-day winning run. Japanese shares gained on a weak yen. Markets in mainland China remain shut for Golden Week.

The pound weakened after the Guardian reported that Bank of England Governor Andrew Bailey held out the prospect for “bit more aggressive” interest-rate cuts.

There’s some “profit-taking as the stimulus momentum has stalled with China away on holiday,” said Charu Chanana, global markets strategist at Saxo Markets. “Markets still remain uncertain about the impact of the announcements to address China’s structural headwinds.”

European traders will head to their desks in the backdrop of rising headwinds for companies in the region with French President Emmanuel Macron endorsing a temporary tax on the country’s largest companies. US prosecutors broadened a probe of potential price-fixing by German software maker SAP SE and tech reseller Carahsoft Technology Corp.

Japan’s Topix index rose more than 1% after new prime minister Shigeru Ishiba said on Wednesday the economy isn’t ready for another interest-rate increase, sending the yen lower. Japan’s currency slipped 0.2% Thursday to 146.78 per dollar after tumbling 2% the day before.

Renewed vigor in the dollar added to the pressure on the yen as stronger-than-expected ADP jobs data on Wednesday led traders to pare bets on aggressive Federal Reserve rate cuts. Swaps traders were penciling in some 33 basis points of policy easing at the central bank’s November meeting, down from 44 basis points just last week.

Global equities are on course for their first weekly loss in four weeks amid the lingering threat of an escalation of geopolitical tensions in the Middle East as well as speculation over the pace of the Fed’s monetary policy easing. Investors focus will be on Friday’s nonfarm payroll data to further gauge the size of the next Fed cut.

“Following the initial jitters from geopolitical risks in the Middle East, Asian markets have managed to regain some composure in today’s session,” said Jun Rong Yeap, a market strategist at IG Asia Pte. “The question has been about how aggressive Israel’s response will be and whether energy infrastructure will be impacted, but expectations are that more clarity may still take some time,” he said.

Story continues

Oil rose as investors awaited Israel’s response to Iran’s missile attack, with US President Joe Biden urging Israel to hold off from attacking Iran’s nuclear facilities.

Bloomberg’s dollar index gained for a fourth day, bolstered by rising Treasury yields. The US 10-year yield rose one basis point to 3.79% in Asian trade after jumping five basis points in New York amid the flare-up in Middle-East tensions.

Key events this week:

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.2% as of 2:56 p.m. Tokyo time

• Nikkei 225 futures (OSE) rose 2.2%

• Japan’s Topix rose 1.1%

• Australia’s S&P/ASX 200 was little changed

• Hong Kong’s Hang Seng fell 1.9%

• Euro Stoxx 50 futures fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro fell 0.2% to $1.1028

• The Japanese yen was little changed at 146.58 per dollar

• The offshore yuan fell 0.1% to 7.0458 per dollar

Cryptocurrencies

• Bitcoin rose 0.4% to $61,161.35

• Ether was little changed at $2,383.44

Bonds

• The yield on 10-year Treasuries was little changed at 3.79%

• Japan’s 10-year yield was little changed at 0.815%

• Australia’s 10-year yield advanced six basis points to 4.02%

Commodities

• West Texas Intermediate crude rose 1.3% to $71.03 a barrel

• Spot gold fell 0.2% to $2,653.84 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu and John Cheng.

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