Stocks Fall in Risk-Off Move Before Fed, Earnings: Markets Turn

(Bloomberg) — Asian shares fell amid speculation that investors are unwinding their investments 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. The American and European futures were little changed.

Most read from Bloomberg

The MSCI Asia Pacific Index is heading for a 0.4% decline in July, the 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.

The yen weakened against all its Group of 10 peers as the Bank of Japan began a two-day meeting amid speculation that any policy tightening would be too slow to address the appeal of yen-financed carry trades grope. The dollar was mixed as traders positioned for a Federal Reserve review Wednesday. 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 assessing the outcome of a meeting of China’s Politburo 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 story continues

The S&P 500 closed 0.1% higher on Monday, while the “Magnificent Seven” mega-cap index rose 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:

• Eurozone economic confidence, GDP, consumer confidence, Tuesday

• US JOLTS jobs, consumer confidence, Tuesday

• Microsoft earnings, Tuesday

• Eurozone CPI, Wednesday

• Bank of Japan policy decision, Wednesday

• US ADP employment change, Wednesday

• Fed rate decision, Wednesday

• Meta Platforms earnings, Wednesday

• Eurozone S&P Global Eurozone Manufacturing PMI, unemployment, Thursday

• U.S. Initial Unemployment Claims, ISM Manufacturing, Thursday

• Amazon, Apple earnings, Thursday

• Bank of England interest rate decision, Thursday

• US employment, factory orders, Friday

Some of the major moves in the markets:

Shares

• Futures on the S&P 500 were little changed at 6:41 a.m. London time

• Japan’s Topix fell 0.3%

• Australia’s S&P/ASX 200 fell 0.5%

• Hong Kong’s Hang Seng fell 1.2%

• The Shanghai Composite fell 0.5%

• Euro Stoxx 50 futures rose 0.1%

• Nasdaq 100 futures were little changed

• Australia’s S&P/ASX 200 fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0823

• The Japanese yen fell 0.4% to 154.58 per dollar

• The offshore yuan was little changed at 7.2689 per dollar

• The Australian dollar rose 0.2% to $0.6559

• The British pound was little changed at $1.2854

Cryptocurrencies

• Bitcoin fell 1.4% to $66,443.15

• Ether fell 0.6% to $3,301.92

Bonds

• The yield on 10-year government bonds was little changed at 4.18%

• The Japanese ten-year yield fell by 2.5 basis points to 1,000%

• The Australian ten-year yield rose by one basis point to 4.29%

Raw materials

• West Texas Intermediate crude fell 0.3% to $75.56 a barrel

• Spot gold rose 0.2% to $2,389.25 an ounce

This story was produced with the help of Bloomberg Automation.

–With help from Jason Scott, John Cheng, and Yongchang Chin.

Most read from Bloomberg Businessweek

©2024 BloombergLP