Finance
Stocks fall in risky mood ahead of major events: markets close
(Bloomberg) — Asian shares fell amid speculation that investors are trimming some of their holdings ahead of a flurry of events in the coming days, including major central bank decisions, key economic data and earnings from U.S. mega-cap companies.
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The MSCI Asia Pacific Index extended its July decline to 0.5%, marking its first monthly decline since April. Hong Kong stocks led losses on Tuesday, falling more than 1% as optimism over the Chinese government’s stimulus plans waned. Australian and Japanese shares also fell, and US stock futures fell slowly.
The yen remained near its strongest level in 12 weeks ahead of a Bank of Japan policy decision on Wednesday. The dollar edged higher against most of its major peers as traders prepared for a Federal Reserve review the same day. Government bonds were little changed and headed for a third month of gains.
“Market participants are taking risk off the table ahead of the risks of big events this week, from key central bank meetings to big tech earnings,” said Charu Chanana, strategist at Saxo Capital Markets in Singapore.
BOJ Governor Kazuo Ueda will put investors on high alert on Wednesday when he lays out a detailed plan for quantitative tightening after years of massive easing. He can also double down by adding an interest rate hike. The central bank is looking for evidence that sustained wage increases will stimulate a recovery in consumption and fuel demand-driven price growth, allowing authorities to further normalize monetary policy.
Chinese government bonds advanced and 10-year yields fell to a new record low. The rally in stock markets is testing the patience of the central bank, which is balancing between boosting growth with easing measures and curbing potential financial shocks from an overheated bond market.
Investors are also looking to the outcome of a meeting of China’s Politburo – possibly sometime this week – for some guidance on possible stimulus measures. Still, sentiment remains negative after efforts to boost growth this year failed to reverse the real estate decline and revive subdued consumer demand.
“Investing in China is highly dependent on policy, but from the Third Plenum to the Politburo now, there has been no exciting policy so far,” said Steven Leung, executive director of UOB Kay Hian Hong Kong. “Investors are not interested in Chinese stocks and tend to further reduce their positions.”
The S&P 500 closed fractionally higher on Monday, with the gauge of the “Magnificent Seven” mega-caps rising 1%. The Russell 2000 of smaller companies fell 1.1%. Tesla Inc. jumped on a bullish call from Morgan Stanley. Investors of McDonald’s Corp. shrugged off a sales decline as executives promised to launch new promotions.
It is widely expected that US policymakers, who have kept interest rates at their highest level in more than two decades for a year, will leave them at that level again on Wednesday. But investors see officials signaling a move in September as risks mount that a solid but moderating labor market is at risk.
July’s wild stock run has underscored how betting on seven major tech companies is no longer a simple, slam-dunk trade. For most of the month, investors turned to other corners of the market as they believed Fed cuts would further boost corporate America. Still, the S&P 500 ultimately suffered two consecutive weeks of losses, dragged down by its most influential group: technology.
In company news: BHP Group Ltd. has collaborated with Lundin Mining Corp. to Filo Corp. to buy, gaining access to South American copper projects.
Commodities have wiped out all their gains this year as the challenging outlook in China, combined with a US natural gas sell-off and food losses, have weighed on commodities. Gold fell for a second day while the dollar stabilized.
Main events this week:
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Eurozone economic confidence, GDP, consumer confidence, Tuesday
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US JOLTS jobs, consumer confidence, Tuesday
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Microsoft earnings, Tuesday
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Eurozone CPI, Wednesday
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Bank of Japan policy decision, Wednesday
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US ADP employment change, Wednesday
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Fed rate decision, Wednesday
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Meta Platforms earnings, Wednesday
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Eurozone S&P Global Eurozone Manufacturing PMI, unemployment, Thursday
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U.S. Initial Unemployment Claims, ISM Manufacturing, Thursday
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Amazon, Apple earnings, Thursday
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Bank of England interest rate decision, Thursday
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US employment, factory orders, Friday
Some of the major moves in the markets:
Shares
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S&P 500 futures fell 0.2% as of 1:20 p.m. Tokyo time
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Nikkei 225 futures (OSE) fell 0.6%
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Japan’s Topix fell 0.8%
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Australia’s S&P/ASX 200 fell 0.5%
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Hong Kong’s Hang Seng fell 1.2%
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The Shanghai Composite fell 0.5%
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Euro Stoxx 50 futures were little changed
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0825
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The Japanese yen was little changed at 154.07 per dollar
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The offshore yuan was little changed at 7.2705 per dollar
Cryptocurrencies
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Bitcoin fell 1.1% to $66,630.95
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Ether fell 0.2% to $3,316.07
Bonds
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The yield on 10-year government bonds was little changed at 4.18%
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Japanese ten-year yields fell by two basis points to 1.005%
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The Australian ten-year yield was little changed at 4.28%
Raw materials
This story was produced with the help of Bloomberg Automation.
–With help from Jason Scott, John Cheng, and Yongchang Chin.
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