Stocks fall, futures waver amid Fed, virus risks: markets wrap

Stocks fell Tuesday and US equity futures wavered amid caution over economic risks from the omicron virus strain and central bank efforts to curb high inflation. Treasuries and the dollar held gains.

MSCI Inc.’s Asia-Pacific share index fell for a third session, with Chinese property and technology stocks struggling. Concerns about Beijing’s crackdown on China’s indebted property sector have flared anew, hurting sentiment. The nation’s real-estate downturn likely sapped economic activity in November.

S&P 500, Nasdaq 100 and European equity contracts fluctuated. The S&P 500 slid Monday from a record and the tech-heavy Nasdaq 100 underperformed.

Treasury yields declined in US hours, led by the 30-year bond. Traders are braced for the Federal Reserve to taper stimulus more quickly and signal an interest-rate liftoff in 2022, both potential economic challenges.

The Fed policy decision due Wednesday is among 20 central bank meetings this week that could stir market swings. Investors are grappling with the implications of reduced monetary policy support while awaiting more clarity on the economic threats from omicron.

“Volatility will remain elevated throughout all of this week’s rate decisions from the Fed, ECB and BOE,” Edward Moya, senior market analyst at Oanda Corp., wrote in a note. “2022 is still expected to be a strong global growth story, but accelerated central bank hawkishness could be the one thing that helps deliver the first major pullback with US equities.”

In commodities, crude oil extended a retreat in part on the possible obstacles to global reopening if omicron leads to wider mobility curbs. Other raw material prices also weakened, spurring declines in commodity currencies, led by the Australian dollar.

‘Bubble assets’

Cryptocurrencies steadied in the wake of another swoon. Bitcoin, now trading around $47 000, is down more than 30% from a November record.

“It has been a strong year, we expect it to end strong, but investors have to be careful with bubble assets,” Eva Ados, ERShares chief investment strategist, said on Bloomberg Television. “The worst when it comes to inflation is behind us. Tapering has been somehow baked in. We are cautiously optimistic, but there are many risks on the horizon too.”

On the virus front, the omicron variant dented the protection afforded by two doses of Pfizer Inc.’s and AstraZeneca Plc’s Covid vaccines as feared, researchers found, increasing the risk of infection. China reported its first omicron case.

Meanwhile, Elon Musk is accelerated his disposal of Tesla Inc. shares after last month’s Twitter poll, as he exercises more options. The world’s richest person offloaded another 934 091 shares for about $906.5 million to cover taxes on the exercise of 2.1 million options, according to regulatory filings dated Monday.

Here are some key events this week:

• Euro zone industrial production, Tuesday.
• US PPI, Tuesday.
• China releases November industrial output, retail sales data, Wednesday.
• Fed rate decision, Wednesday.
• US business inventories, retail sales, empire manufacturing, Wednesday.
• BOE rate decision, Thursday.
• ECB rate decision, Thursday.
• US housing starts, initial jobless claims, industrial production, Thursday.
• BOJ monetary policy decision, Friday.
• S&P Dow Jones Indices quarterly rebalance effective after markets close, Friday.
• “Quadruple witching” day in the U.S. market, when options and futures on indexes and equities expire, Friday.

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.1% as of 6:03 a.m. in London. The S&P 500 fell 0.9%
• Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 1.5%
• Japan’s Topix index fell 0.2%
• Australia’s S&P/ASX 200 Index was steady
• South Korea’s Kospi index fell 0.4%
• Hong Kong’s Hang Seng Index index fell 1.4%
• China’s Shanghai Composite index fell 0.6%
• Euro Stoxx 50 futures added 0.1%

Currencies

• The Japanese yen was at 113.58 per dollar
• The offshore yuan was at 6.3697 per dollar
• The Bloomberg Dollar Spot Index was steady
• The euro was at $1.1280

Bonds

• The yield on 10-year Treasuries was at 1.42%
• Australia’s 10-year bond yield fell six basis points to 1.54%

Commodities

• West Texas Intermediate crude was at $71.24 a barrel, down 0.1%
• Gold was at $1 787.52 an ounce