Stocks, Futures Fall as China Saps Mood; Dollar Up

28/07/2021 Asian stocks extended declines Wednesday as a rout in China and a mixed response to major U.S. technology earnings spurred caution. MSCI Inc.’s Asia-Pacific equity gauge retreated to the lowest level since December. Equities in China and Hong Kong fell further, exacerbating this week’s plunge on a regulatory crackdown by Beijing that’s stirred questions about how far officials will go to curb big companies. A flight-to-quality sparked by the China selloff and a solid 5-year auctionboosted Treasuries overnight, and they retained the gains. The dollar snapped a two-day retreat and the offshore yuan pared a slide. Gold is trading back above the $ 1800 mark.

Locally the focus was once again on the Naspers stable as Tencent fell another 9 % yesterday, NPN and PRX fell 7.33 and 7.30 percent respectively leading to the All Share closing down 1.04%. Tencent is now 43% off its late January high of HK$ 7.66. we will be in for another negative start as Tencent is a further 3.05% lower, Asian markets are softer across the region and US and European Futures point lower. IG Top 40 markets are 151 points lower. Investor focus will be on the Fed, however, as markets wait to see just how quickly monetary conditions will tighten as the world’s largest economy recovers and inflation accelerates.

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European markets closed lower on Tuesday as investors monitored corporate earnings, along with extreme weather and the spread of Covid-19 across the continent. The pan-European Stoxx 600 ended the session down by 0.5%, with technology shares slumping 1.6% to lead losses as most sectors and major bourses dipped into the red. FTSE – 0.42%, CAC – 0.71%, DAX – 0.64%. In the U.K., Bank of England policymaker Gerhan Vlieghe said the central bank should avoid downscaling its monetary stimulus program for at least several quarters, amid what the BOE sees as a temporary spike in inflation and the lingering threat of Covid-19.
In the US futures are lower after the major averages pulled back from record highs, snapping a five-day winning streak. During regular trading the S&P dipped 0.47%, while the Dow shed 85.79 points, or 0.24%. At the lows of the day the 30-stock benchmark dipped more than 260 points. The Nasdaq Composite declined 1.21% for its worst daily performance since May 12. All three major averages finished Monday’s session at record highs. A host of megacap tech names reported quarterly results on Tuesday after the market closed, including Apple, which beat top- and bottom-line estimates and said iPhone sales jumped 50% year over year. Google-parent Alphabet also posted quarterly results, registering a 69% jump in advertising revenue, while Microsoft beat earnings despite a dip in revenue from its Windows division.
The busiest week of earnings continues on Wednesday with Pfizer, McDonald’s, Qualcomm, Facebook, Ford and PayPal among the names on deck. Of the S&P 500 companies that have reported quarterly results thus far, 89% have topped earnings estimates, while 86% have exceeded revenue expectations, according to data from Refinitiv. Despite Tuesday’s dip, the major averages are still on track to end the month higher. The S&P is up 2.4% for July, while the Nasdaq Composite and Dow have gained 1.1% and 1.6%, respectively.
Shares in Asia-Pacific were mostly lower in Wednesday morning trade, with stocks in Hong Kong struggling to bounce back from a two-day rout. The Hang Seng has bounced to trade up 0.55% as some major Tech stocks rally off earlier lows. This follows a more than 8% decline over two days earlier this week triggered by regulatory fears over sectors such as technology and private education. Stocks of firms in the private education space, another sector hit by regulatory scrutiny, bounced back after heavy losses earlier in the week: New Oriental Education & Technology Group gained 6.84% while Koolearn Technology jumped 9.42%. Nikkei – 1.49%, Kospi – 0.24%, ASX 200 – 0.70%. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.68%.
Gold spot is firmer this morning ahead of the Fed minutes, Gold is trading up 0.49% at $ 1806, Platinum up 0.80% at $ 1062 and Palladium + 0.67% at $ 2627.

Oil prices climbed this morning after industry data showed U.S. crude and product inventories fell more sharply than expected last week, reinforcing expectations that demand will outstrip supply growth even amid a surge in Covid-19 cases. Brent is up 0.52% at $ 74.87 and WTI up 0.68% at $ 72.13.