Stocks tumble on unrest in China, dollar climbs: markets wrap

Shares slid while the dollar and Treasuries rose as growing unrest in China over Covid restrictions sent a shiver through global markets.

Chinese equities led stock-market declines in Asia, with weakness also evident European futures. US contracts dropped as modest customer traffic and heavy discounting by American retailers on Black Friday added to the downbeat tone.

The greenback strengthened on haven demand, showing notable gains against the currencies of Australia and South Korea, which are heavily exposed to trade with China. The onshore yuan dropped as much as 1% before trimming its loses.

The advance in Treasuries was accompanied by a rally in Australian and New Zealand government bonds. Meanwhile, the cost to insure Asia’s ex-Japan high-rated dollar bonds against default headed for its first increase in five days.

“Markets will respond negatively to the widespread protests and rising case numbers, which are likely to trigger new supply-chain disruptions and dampen consumption demand, at least in the short term,” said Gabriel Wildau, managing director at Teneo Holdings LLC in New York.

Oil slumped to the lowest level since December as the developments in China punished risk assets and clouded the outlook for energy demand, adding to stresses in an already-fragile global crude market.

Gold edged lower as the dollar strengthened, placing downward pressure on the precious metal.

The downbeat mood emanating from China contrasts with the boost to sentiment in global markets last week after the Federal Reserve’s Nov. 1-2 meeting minutes showed most officials backing slowing the pace of interest-rate hikes.

Fed focus

Since the Fed’s latest meeting, investors have parsed a bevy of economic data that somewhat eased inflation concerns, further strengthening the case for smaller rate hikes.

The S&P 500 notched a weekly gain of 1.5% that took the index to the highest level since early September. The Nasdaq 100 also eked out a gain for the week.

All eyes will be on the US jobs report this week and on Fed Chair Jerome Powell and New York Fed President John Williams, who are among central bank officials scheduled to speak.

Amid the challenges in China, the nation’s central bank on Friday cut the amount of cash lenders must hold in reserve for the second time this year, an escalation of support for an economy that’s being weighed down by Covid curbs.

“Anything exposed to China is probably going to be vulnerable,” said Jessica Amir, a market strategist at Saxo Capital Markets in Sydney. “Forward earnings of Chinese exposed companies will be in question and investors will probably express that by selling.”

Key events this week:

• Fed’s John Williams speaks, Monday
• Fed’s James Bullard MarketWatch interview, Monday
• ECB’s Christine Lagarde addresses European Parliament committee, Monday
• 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, Fed’s Michelle Bowman Lisa Cook speak, 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
• Fed’s Lorie Logan, Michelle Bowman, Michael Barr speak, Thursday
• BOJ’s Haruhiko Kuroda speaks, Thursday
• US unemployment, nonfarm payrolls, Friday
• Fed’s Charles Evans speaks, Friday
• ECB’s Christine Lagarde speaks, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.7% as of 3:09 p.m. Tokyo time.
• Nasdaq 100 futures fell 0.9%
• Euro Stoxx 50 futures fell 0.6%
• The Topix Index fell 0.7%
• The S&P ASX Index fell 0.4%
• The Hang Seng Index fell 2.1%
• The Shanghai Composite Index fell 1.4%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%
• The euro fell 0.4% to $1.0357
• The Japanese yen rose 0.7% to 138.22 per dollar
• The offshore yuan fell 0.5% to 7.2273 per dollar
• The Australian dollar fell 1.1% to $0.6677

Cryptocurrencies

• Bitcoin fell 2.5% to $16,152.68
• Ether fell 3.9% to $1,167.61

Bonds

• The yield on 10-year Treasuries declined four basis points to 3.64%
• Australia’s 10-year yield declined six basis points to 3.52%

Commodities

• West Texas Intermediate crude fell 2.9% to $74.05 a barrel
• Spot gold fell 0.3% to $1 750.18 an ounce

This story was produced with the assistance of Bloomberg Automation.