US stocks fall on China Covid fears; Dollar gains: Markets wrap

(Bloomberg) — U.S. stocks fell amid concerns about the U.S. growth outlook as the Federal Reserve pledged to fight inflation. Investors are also seeking refuge in the dollar as concerns grow that China may tighten Covid restrictions after a series of deaths.

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The S&P 500 and Nasdaq 100 fell. U.S.-listed Chinese shares retreated as traders assessed whether China’s reopening could see a setback. The Walt Disney Company soared after surprisingly bringing former chairman Bob Iger back as CEO.

The dollar rose against its Group-of-10 peers and emerging market currencies. Treasuries rose. Oil fell on weaker demand outlook from China.

China saw its first Covid-related death in nearly six months on Saturday, and two more were reported on Sunday. Worse outbreaks across the country are fueling concerns that authorities may resort to tougher restrictions again. A city near Beijing, rumored to be a test case for ending virus restrictions, has suspended schools, locked down universities and asked residents to stay home for five days.

“New lockdowns in major cities will not only take a sledgehammer to growth at the end of the year, but also complicate any plans to soften the zero-covid policy next year,” said senior market analyst Craig Erlam. In Onda. “We are back in an area of ​​uncertainty that is slowing the recovery in equity markets.”

Traders this week will look to minutes from the most recent Federal Reserve policy meeting for more clues about the direction of rate hikes.

“The November Fed meeting feels like a long time ago, but it could be an opportunity to push markets back a bit,” Citigroup economist Veronica Clark said on Bloomberg Television on Monday. “Now for the Fed, if we get a little bit of a slowdown in inflation — we might see that — but you don’t see that in the services inflation slowdown, that’s related to the tight labor market. You should see that loosening in the labor market data.

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Atlanta Fed President Rafael Bostic said he wants to slow the pace of interest rate hikes to try to ensure a soft landing for the economy. Boston Fed President Susan Collins reiterated that options are open for the size of a December interest rate hike, including the possibility of a 75 basis point move.

From a stock perspective, Goldman Sachs Group Inc. Strategists say investors hoping for a better year in 2023 will be disappointed, as the bear market phase is far from over.

Strategists including Peter Oppenheimer and Sharon Bell wrote in a note on Monday that “conditions generally consistent with an equity trough have not yet been reached.” They said lower valuations reflecting peaks and troughs in interest rates are necessary before any sustained stock market recovery can occur.

Highlights of this week:

  • US Richmond Fed Manufacturing Index, Tuesday

  • The OECD publishes its economic outlook on Tuesday

  • The Fed’s Loretta Meister and James Bullard speak Tuesday

  • S&P Global PMIs: US, Euro Area, UK, Wed

  • US MBA Mortgage Applications, Durable Goods, Initial Jobless Claims, University of Michigan Sentiment, New Home Sales, Wednesday

  • Minutes of the Federal Reserve’s November 1-2 meeting, Wednesday

  • The ECB publishes an account of its October policy meeting on Thursday

  • US stock and bond markets are closed for the Thanksgiving holiday on Thursday

  • US stock and bond markets open on Friday

Some key movements in the markets:

Shares

  • The S&P 500 was down 0.3% as of 9:30 a.m. New York time

  • The Nasdaq 100 fell 0.4%

  • The Dow Jones industrial average rose 0.2%

  • The Stoxx Europe 600 was little changed

  • The MSCI world index rose 0.6%

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Coins

  • The Bloomberg Dollar Spot Index rose 0.5%

  • The euro fell 0.7% to $1.0251

  • The British pound fell 0.6% to $1.1823

  • The Japanese yen fell 0.7% to 141.38 per dollar

Cryptocurrencies

  • Bitcoin was down 0.4% at $16,184.68

  • Ether fell 0.4% to $1,136.75

Bonds

  • The yield on 10-year Treasuries fell six basis points to 3.77%.

  • Germany’s 10-year yield fell six basis points to 1.96%

  • Britain’s 10-year yield fell five basis points to 3.19%.

materials

  • West Texas Intermediate crude was down 2.3% at $78.25 a barrel.

  • Gold futures fell 0.4% to $1,762.30 an ounce

This story was produced with the help of Bloomberg Automation.

–With assistance from Tasia Sipahuder, Robert Brandt, Peyton Forte, Isabelle Lee and Brett Miller.

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