U.S. 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 U.S. equity indexes retreated after Hong Kong airport authorities canceled remaining flights for the day, while 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.
The Monday 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 a lot of lingering caution. Traders have been increasing bets for central bank easing in recent weeks as the U.S. and China escalate their trade war and a slew of global data point 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 for a ninth straight month in August as the impact of the U.S.-China trade spat spreads. Argentina’s euro-denominated bonds slid in 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 Barrick Gold, China’s Tencent, JD.com and Alibaba, Cisco, Brazilian utility Eletrobras, the U.K.’s Prudential, Australia’s Telstra, giant retailer Walmart, Nvidia, Swisscom and the Danish brewer Carlsberg.
- The U.S. 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 U.S. jobless claims, industrial production and retail sales data.
These are the main moves in markets:
- Futures on the S&P 500 Index declined 0.5% as of 11:15 a.m. London time.
- The Stoxx Europe 600 Index dipped 0.1%.
- The MSCI Asia Pacific Index decreased 0.1%.
- The Shanghai Composite Index jumped 1.5%.
- The Bloomberg Dollar Spot Index increased 0.2%.
- The offshore yuan fell 0.1%.
- The euro dipped 0.1% to $1.1187.
- The Japanese yen strengthened 0.5% to 105.20 per dollar.
- The British pound increased 0.3% to $1.2074.
- The yield on 10-year Treasuries fell five basis points to 1.69%.
- Britain’s 10-year yield climbed less than one basis point to 0.488%.
- The spread of Italy’s 10-year bonds over Germany’s declined three basis points to 2.347 percentage points.
- Germany’s 10-year yield dipped one basis point to -0.59%.
- Gold climbed 0.6% to $1,505.93 an ounce.
- West Texas Intermediate crude fell 1.4% to $53.75 a barrel.
- LME aluminum increased 0.8%.
— With assistance by Luke Kawa, and Adam Haigh