European stocks dropped, tracking an overnight tech-led decline on Wall Street, as China’s pledge to support its economy disappointed investors hoping for new stimulus.

The Stoxx 600 index fell 0.8%, led by declines in miners and luxury stocks, the sectors most exposed to the Chinese economy. Kering SA and Burberry Plc slumped more than 5%. Widely anticipated stimulus measures were absent from a press conference in Beijing, where officials vowed to meet economic targets. A gauge of Chinese stocks in Hong Kong tumbled the most intraday since 2008.

This followed overnight declines in US equities driven by a tech selloff, geopolitical angst and bets on a smaller Federal Reserve rate cut. US equity futures were little changed. The Treasury curve steepened and oil fell.

The briefing by China’s National Development and Reform Commissioncame before the Golden Week holiday break sent shares in China and Hong Kong surging. Numerous investors from JPMorgan Asset Management to HSBC Global Private Banking questioned the sustainability of that rally.

“While the policy tone is still certainly indicating a supportive tone, the limited new measures appear to be disappointing markets for now,” said Lynn Song, Greater China chief economist at ING Bank NV. “Moving forward, the market trend will likely depend on the speed and strength of further policy follow-up from other ministries.”

The S&P 500 fell 1% on Monday after notching a four-week winning run. In the wake of Friday’s solid jobs data, Treasuries continued to drop — with the 10-year yield topping 4%. The Fed is “well positioned” to pull off a soft landing for the economy, New York Fed president John Williams told the Financial Times in an interview.

“Friday’s strong jobs report not only appeared to kill any chance of a 50-basis-point rate cut in November, it kickstarted chatter about the Fed leaving rates unchanged if economic data continues to come in hotter than expected,” said Chris Larkin at E*Trade from Morgan Stanley. “But as last week showed, geopolitics can’t be ignored.”

The crisis in the Middle East continued to unnerve investors, with fighting escalating Monday on multiple fronts after a year of war. The Israel Defense Forces said it intercepted most of a barrage of rockets fired toward Tel Aviv by Hamas and other Iran-backed groups. Brent crude soared to its highest price since August as speculation increased that Israel may attack Iran’s oil infrastructure. West Texas Intermediate rose early Tuesday.

To Dave Sekera at Morningstar, if there is any further geopolitical escalation, that would potentially spur the risk-off trade — with growth shares underperforming value ones.

“Typically, in a risk-off trade, you’re going to see rotation into defense stocks, but I’d be careful if you’re an investor today,” he said. “Some of the defensive sectors today are already overvalued. Unlike a typical risk-off trade, I think oil stocks would go up.”

Key events this week:

• Fed’s Raphael Bostic, Susan Collins, Philip Jefferson and Adriana Kugler speak, Tuesday
• Fed minutes, Wednesday
• Fed’s Lorie Logan, Raphael Bostic, Austan Goolsbee and Mary Daly speak, Wednesday
• US initial jobless claims, CPI, Thursday
• Fed’s John Williams and Thomas Barkin speak, Thursday
• JPMorgan, Wells Fargo kick off earnings season for the big Wall Street banks, Friday
• US PPI, University of Michigan consumer sentiment, Friday
• Fed’s Lorie Logan, Austan Goolsbee and Michelle Bowman speak, Friday
• Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.8% as of 8:13 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures were little changed
• Futures on the Dow Jones Industrial Average were little changed
• The MSCI Asia Pacific Index fell 1.8%
• The MSCI Emerging Markets Index fell 1.8%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0984
• The Japanese yen rose 0.2% to 147.81 per dollar
• The offshore yuan rose 0.2% to 7.0566 per dollar
• The British pound fell 0.1% to $1.3069

Cryptocurrencies

• Bitcoin fell 1.1% to $62,313.13
• Ether fell 0.5% to $2,428.15

Bonds

• The yield on 10-year Treasuries declined three basis points to 4.00%
• Germany’s 10-year yield declined two basis points to 2.24%
• Britain’s 10-year yield declined two basis points to 4.18%

Commodities

• Brent crude fell 1.5% to $79.73 a barrel
• Spot gold fell 0.2% to $2,637.09 an ounce
• This story was produced with the assistance of Bloomberg Automation.

Source : Yahoo Finance - Oct 8, 2024