U.S. index futures pared gains and a rally in European stocks declined as investors awaited insights on the Federal Reserve’s policy path amid lingering concerns about the threat of Covid-19 to the global economy.
Contracts on the Nasdaq 100 and S&P 500 held modest gains after a rebound in Chinese technology stocks initially buoyed global stocks. U.S.-listed Chinese companies rose in pre-market trading, with Alibaba Group Holding Ltd. and JD.com Inc. up more than 5% and 8% respectively.
The lift from the Chinese tech rally didn’t last for European stocks, though, with the Stoxx Europe 600 index reversing an advance as declines for healthcare and utilities offset increases for cyclical shares including travel and autos. Basic resources outperformed as crude oil extended an advance and iron ore surged more than 10%.
While markets started the week with a strong global rally, gains in Europe and the U.S. are fizzling on concern over the spread of the delta virus variant and tighter monetary policy. Economic data this week painted a mixed picture, with manufacturing purchasing managers’ indexes in Europe and the U.S. showing showing continued growth, though slowing from last month’s levels.
“The feeling is Fed chair Jay Powell will err on the side of caution at this week’s Jackson Hole symposium and fail to offer advance notice of tapering its asset purchase program,” Chris Weston, head of research at Pepperstone Financial Pty, wrote in a note. He added some traders may have felt that “now is the time to wade into a bit of cyclicality.”
The Hang Seng Tech Index advanced more than 7%, adding to a 2% gain on Monday, after a five-week rout that took the gauge to the lowest level since its inception last year. Bargain-hunters were emboldened by Tencent Holdings Ltd.’s share buyback and strong results from JD.com.
Treasury yields were little changed, and the dollar was flat against a basket of major currencies after plunging the most since May on Monday. WTI crude oil rose above $66 following a jump of more than 5%, and iron ore climbed on expectations additional support from the Chinese government will boost demand for steel.
While Covid-19 cases are falling in many of the original delta-variant hot spots in the U.S., concerns remain that the hyper-infectious strain could make a comeback as schools and colleges reopen. Meanwhile, infections are surging in Southeast Asia, jeopardizing plans to lift lockdowns and threatening to aggravate shortages of semiconductors and other components that have hammered automakers for months.
Here are some events to watch this week:
- Bank of Korea policy decision; briefing by Governor Lee Ju-yeol Thursday
- Fed officials attend the Jackson Hole Economic Policy Symposium from Thursday through Saturday
- U.S. GDP, initial jobless claims Thursday
- July U.S. personal income and spending data Friday. Investors will scrutinize the personal consumption expenditures price index, an inflation measure closely watched by the Fed.
Some of the main moves in markets:
- Futures on the S&P 500 rose 0.1% as of 8:16 a.m. New York time
- Futures on the Nasdaq 100 rose 0.2%
- Futures on the Dow Jones Industrial Average rose 0.1%
- The Stoxx Europe 600 fell 0.2%
- The MSCI World Index rose 0.3%
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1744
- The British pound was little changed at $1.3724
- The Japanese yen was little changed at 109.61 per dollar
- The yield on 10-year Treasuries was little changed at 1.26%
- Germany’s 10-year yield was little changed at -0.48%
- Britain’s 10-year yield was little changed at 0.53%
- West Texas Intermediate crude rose 1.4% to $66.57 a barrel
- Gold futures were little changed
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