Global markets sink ahead of Fed update on economy

BEIJING (AP) – Global stock markets declined yesterday as investors looked ahead to a Federal Reserve report for an update on when United States (US) stimulus might start winding down.

London and Frankfurt opened lower while Shanghai and Hong Kong declined. Tokyo advanced.

On Monday, Wall Street’s benchmark S&P 500 index rose to a new record, shrugging off worries about the spread of the more contagious delta variant of the coronavirus.

Investors awaited the Fed report for signs of the central bank’s level of concern about inflation and when it might start rolling back easy credit and other economic stimulus. Minutes of the Fed meeting in June showed board members discussed how and when they might reduce monthly bond purchases that inject money into the financial system.

“We expect Jay Powell to reiterate that the tapering discussion is underway, but that it’s too soon to reveal a specific date,” Danielle DiMartino Booth of Quill Intelligence said in a report. In early trading, the FTSE 100 in London lost 0.9 per cent to 6,961.11 and the DAX in Frankfurt was off 0.9 per cent at 15,471.67. The CAC 40 retreated 0.7 per cent to 6,534.16.

On Wall Street, the S&P 500 future was off 0.4 per cent and that for the Dow Jones Industrial Average lost 0.5 per cent.

A woman walks past a bank’s electronic board showing the Hong Kong share index at Hong Kong Stock Exchange in Hong Kong. PHOTO: AP

On Monday, the S&P 500 and Dow both gained 0.2 per cent. The Nasdaq composite added less than 0.1 per cent.

In Asia, the Shanghai Composite Index lost 2.5 per cent to 3,381.18 as data-safety and other enforcement actions weighed on Chinese Internet and other companies. The Hang Seng in Hong Kong tumbled 4.2 per cent to 25,086.43, pulled down by China shares.

The Nikkei 225 in Tokyo advanced 0.5 per cent to 27,970.22.

The Kospi in Seoul rose 0.2 per cent to 3,232.53 after economic growth moderated to 0.7 per cent over the previous quarter in the three months ending in June, down from previous quarter’s 1.7 per cent. Australia’s S&P-ASX 200 advanced 0.5 per cent to 7,431.40 and India’s Sensex sank 0.6 per cent to 52,505.70. New Zealand, Bangkok and Jakarta, Indonesia, declined while Singapore advanced.

Shares in Chinese companies sank after Beijing announced enforcement measures on technology and real estate and were reported to be considering restrictions on for-profit education ventures. Authorities said they need to protect public safety and financial stability, restrain surging housing costs and promote social welfare. But their abrupt orders shook investor confidence.

Beijing announced a six-month campaign to clean up what it said are serious problems with Internet apps violating consumer rights, cyber security and “disturbing market order”. Internet giant Tencent Holding Ltd was ordered on Saturday to end exclusive contracts with music copyright holders that market regulators said harmed competition. Companies have been fined for anti-monopoly offences.

Tencent’s Hong Kong-traded shares fell nine per cent yesterday. E-commerce giant Alibaba Group lost 6.3 per cent and JD Logistics Inc, an arm of online retailer, tumbled 11 per cent. Smartphone maker Xiaomi Corp shed 5.8 per cent and computer and smartphone maker Lenovo Group lost 4.1 per cent.

“A painfully sobering message may be: ‘You can take the company listing out of China, but you can’t take China (risks) out of the company,'” said Mizuho Bank in a report. “If unresolved, this may ultimately impair the ability of Chinese firms to raise global capital, a serious impediment to Beijing’s aspirations to grow global champions.”

US traders are looking for earnings reports from more large companies this week.

Electric vehicle company Lucid Motors, now dubbed Lucid Group, rose 10.6 per cent in its public debut after being bought by blank-check company Churchill Capital Corp.

In energy markets, benchmark US crude fell six cents to USD71.85 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 16 cents to USD71.91 on Monday. Brent crude, used to price international oils, advanced five cents to USD73.75 per barrel in London. It rose 40 cents the previous session to USD74.50.

The dollar declined to JPY110.04 from Monday’s JPY110.39. The euro fell to USD1.1782 from USD1.1800.