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US stock futures decline as Hong Kong sours mood

Aug 12 2019 14:41
Samuel Potter, Bloomberg

US equity futures reversed an advance on Monday alongside European stocks as mounting unrest in Hong Kong weighed on investor sentiment. Treasuries and the yen extended gains while gold and the dollar both turned higher.

Contracts for all three main US equity indexes retreated after Hong Kong airport authorities canceled remaining flights for the day. A Chinese official said the city was at a "critical juncture" and that there were signs of "terrorism."

The change in mood wiped out the Stoxx Europe 600 Index's jump of as much as 1%. Stocks had earlier increased in Shanghai and edged higher in South Korea and Sydney, though Hong Kong shares dropped and many other markets across Asia were shut for a holiday.

The yen extended its rally for a fourth day, while the offshore yuan nudged lower as China's central bank fixing continued to signal its determination to manage an orderly depreciation. Italian bonds led gains in European debt after Fitch affirmed the country's credit rating on Friday. The pound strengthened following three sessions of declines.

Monday’s reversals provided another reminder of the fragile mood across markets, which have endured a tumultuous start to August. Gains for the safest government bonds point to lingering caution. Traders have increased bets for central bank easing in recent weeks as the US and China escalate their trade war and a slew of global data pointed to slowing growth.

"We remain cautious, as we believe that a number of challenges remain," said Andrew Sheets, chief cross asset strategist at Morgan Stanley in London. "Among them, the risk that high policy expectations make disappointment more likely, and that even if those aggressive expectations are met, easing isn’t expected to improve growth or inflation materially."

Elsewhere, the South Korean won extended declines as data signaled exports are set to drop as the impact of the US-China trade spat spreads. Argentina’s euro-denominated bonds slid after President Mauricio Macri's poor showing in primary elections on Sunday. The Mexican peso slumped.

Here are some key events coming up:

Companies releasing results include China's Tencent, JD.com and Alibaba, Cisco, Brazilian utility Eletrobras, the UK's Prudential, Australia's Telstra, giant retailer Walmart, Nvidia, Swisscom and the Danish brewer Carlsberg.

The US consumer price index, out Tuesday, probably picked up to a 1.7% annual pace in July, according to economist estimates. Core prices, which exclude food and energy, are seen rising 2.1%.

Wednesday brings data on China retail sales, industrial production and the jobless rate.

Thursday sees the release of US jobless claims, industrial production and retail sales data.

These are the main moves in markets: 

Stocks

Futures on the S&P 500 Index dipped 0.7% as of 07:16 in New York.

The Stoxx Europe 600 Index decreased 0.2%.

The MSCI Asia Pacific Index fell less than 0.05%.

The Shanghai Composite Index jumped 1.5%.

Currencies

The Bloomberg Dollar Spot Index increased 0.1%.

The offshore yuan fell less than 0.05%.

The euro decreased 0.1% to $1.1193.

The Japanese yen strengthened 0.6% to 105.10 per dollar.

The British pound climbed 0.5% to $1.2097.

Bonds

The yield on 10-year Treasuries declined six basis points to 1.68%.

Britain's 10-year yield rose one basis point to 0.495%.

The spread of Italy's 10-year bonds over Germany's dipped four basis points to 2.345 percentage points.

Germany's 10-year yield decreased one basis point to -0.59%.

Commodities

Gold rose 0.5% to $1 505.02 an ounce.

West Texas Intermediate crude dipped 1.2% to $53.87 a barrel.

LME aluminum climbed 0.7%.

equities  |  markets  |  currencies
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