Stocks started the week on a negative note on concern China may have to tighten its Covid curbs further, undermining prospects for global economic growth and sparking unrest in key cities.
(Bloomberg) — Stocks started the week on a negative note on concern China may have to tighten its Covid curbs further, undermining prospects for global economic growth and sparking unrest in key cities.
The S&P 500 trimmed its monthly rally.
Apple Inc. slid as Bloomberg News reported that turmoil at its key manufacturing hub of Zhengzhou is likely to result in a production shortfall of close to 6 million iPhone Pro units this year. Amazon.com Inc.
drove gains in retailers, with analysts saying Cyber Monday results will paint a fuller picture of demand this holiday season. Oil hit the lowest since December.
The unrest in China complicates expectations of the country’s path to reopening, which — along with prospects of more moderate Federal Reserve interest-rate increases — had buoyed sentiment toward riskier assets in recent sessions.
Chances are also growing of a messy exit from Beijing’s Covid Zero policy, analysts at Goldman Sachs Group Inc. warned.
“This is going to keep economic activity subdued in the country, and beyond,” said Fawad Razaqzada, market analyst at City Index and Forex.com.
“The civil unrest is adding another layer of uncertainty over the economic situation there. It is certainly hurting investor sentiment across the financial markets.”
Just when the S&P 500 was trying to break above the highs of mid-November, sentiment turned negative, threatening the market’s recent momentum.
Timing is most inconvenient here as the index approaches a crucial technical zone in the shape of both the 2022 downtrend and the 200-day moving average. Should the recent bullishness evaporate, short-term tactical bear trades might spark a bout of profit taking.
Stagflation is the key risk for the global economy in 2023, according to investors who said hopes of a rally in markets are premature following this year’s brutal selloff.
Almost half of the 388 respondents to the latest MLIV Pulse survey said a scenario where growth continues to slow while inflation remains elevated will dominate globally next year. The second most likely outcome is deflationary recession, while an economic recovery with high inflation is seen as least probable.
European Central Bank President Christine Lagarde said Monday she’d be surprised if euro-zone inflation had peaked, suggesting the recent ramp-up in interest rates isn’t close to being over.
Fed Chair Jerome Powell is expected to this week cement expectations that the central bank will slow its pace of hikes next month, while reminding Americans that its fight against inflation will run into 2023.
Powell is scheduled to deliver a speech, nominally focused on the labor market, at an event on Wednesday.
Key events this week:
- Euro area economic confidence, consumer confidence, Tuesday
- US Conference Board consumer confidence, Tuesday
- EIA crude oil inventory report, Wednesday
- China PMI, Wednesday
- Fed Chair Jerome Powell speech, Wednesday
- Fed releases its Beige Book, Wednesday
- US wholesale inventories, GDP, Wednesday
- S&P Global PMIs, Thursday
- US construction spending, consumer income, initial jobless claims, ISM Manufacturing, Thursday
- BOJ’s Haruhiko Kuroda speaks, Thursday
- US unemployment, nonfarm payrolls, Friday
- ECB’s Christine Lagarde speaks, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.6% as of 9:57 a.m.
New York time
- The Nasdaq 100 fell 0.2%
- The Dow Jones Industrial Average fell 0.4%
- The Stoxx Europe 600 fell 0.6%
- The MSCI World index fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro rose 0.3% to $1.0425
- The British pound fell 0.4% to $1.2046
- The Japanese yen rose 0.4% to 138.59 per dollar
Cryptocurrencies
- Bitcoin fell 2.2% to $16,203.2
- Ether fell 4.2% to $1,164.46
Bonds
- The yield on 10-year Treasuries was little changed at 3.68%
- Germany’s 10-year yield advanced three basis points to 2.00%
- Britain’s 10-year yield advanced three basis points to 3.15%
Commodities
- West Texas Intermediate crude fell 1.5% to $75.12 a barrel
- Gold futures fell 0.4% to $1,761.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sujata Rao, John Viljoen, Vildana Hajric, Peyton Forte and Isabelle Lee.
More stories like this are available on bloomberg.com
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