US and European stocks reverse losses as Yellen signals inflation won’t hurt recovery and commodities rally

wall street new york stock exchange

US stocks rose slightly on Wednesday after Treasury Secretary Janet Yellen said she doesn’t expect inflation to be a problem, underplaying previous comments that it may be necessary to raise interest rates to prevent economic overheating.

Futures on the Dow Jones, S&P 500, and Nasdaq rose 0.3%, suggesting a higher start to trading at the market open.

Yellen’s remarks the previous day were likely about longer-term rates, rather than breaking historic convention and commenting on monetary policy, Deutsche Bank strategists said. She also seemed to project the Fed has the necessary tools to address inflation if it were to occur.

But her initial comments prompted a sell-off in tech shares and sent longer-dated Treasury yields higher.

“So it seems like a small matter-of-fact statement has been magnified around financial markets, which just shows how sensitive we all are to rates and inflation,” Deutsche’s strategists said.

A decline in large-cap Wall Street tech darlings led the Nasdaq 1.6% lower at Tuesday’s close as investors dumped their shares on concerns of rising interest rates.

With the S&P 500 around 1% away from record highs, UBS Global Wealth Management says plenty of good news is priced into the market, suggesting stocks are potentially vulnerable to disappointments.

Chief investment officer Mark Haefele said such worries can continue to be seen as a source of volatility rather than developments that are likely to end the equity rally.

“Investors can brace for future bouts of volatility through diversification, and use market swings as an opportunity to build long-term exposure,” he said. “We believe the backdrop of accelerating growth and continuing policy support means that markets can advance further.”

Investors in Europe initially took their cue from the weakness across the US market, but those losses reversed with another busy start to corporate earnings and a burst higher in the commodities complex. Results from car manufacturer Stellantis, insulin-maker Novo Nordisk, and Danish shipping company AP Moller-Maersk are due.

Surging commodity prices pushed up mining stocks in the region, as recovery sentiment lifted. UK mining stocks including Rio Tinto, BHP, and Anglo American each rose about 2% alongside copper prices rising past $10,000 a tonne for the first time in years.

London’s FTSE 100 rose 1%, the Euro Stoxx 50 rose 1.3%, and Frankfurt’s DAX gained 1.4%.

Asian shares were largely muted as markets in China, Japan, and South Korea are still closed for public holidays. Hong Kong’s Hang Seng fell 0.5%, led by weakness in the tech sector.

Oil prices climbed against the backdrop of easing lockdowns in the US and Europe. Brent crude futures rose 3%, to $69.70 per barrel, and West Texas Intermediate rose 1.1%, to $66.45 per barrel.

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US markets dip after a lag in high-flying tech stocks, while European stocks trade higher on reopening confidence

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US markets edged lower on Tuesday after mega-cap technology stocks dropped despite largely upbeat quarterly results over the past week.

Futures on the Dow Jones, S&P 500, and Nasdaq fell between 0.1% and 0.3%, suggesting a weaker start to trade at the opening bell later.

Declines in shares of Amazon, Alphabet, Facebook, and Microsoft have weighed on the broader market. Chipmakers have also been under pressure, as the current semiconductor shortage is having tremendous impacts on lead times and pricing, according to Deutsche Bank strategists.

“There appears to be a general inflation of prices across most, if not all, supply lines,” they said. “This dovetails with what many companies are reporting during this earnings season, and has caused more than a few to lower production guidance for 2021, even as consumer demand continues to rebound with the overall economy.”

But with results in from a majority of the S&P 500 names, 85% of companies have beaten expectations.

UBS chief investment officer Mark Haefele said investors should be careful to avoid over-allocating to mega-cap tech companies in their portfolios. “In an environment of accelerating growth, we continue to prefer cyclical and value sectors such as financials and energy, while positioning for long-term structural growth in industries which could provide ‘The Next Big Thing’,” he said.

The US dollar rallied after Federal Reserve Chair Jerome Powell said the US economic outlook has “clearly brightened,” but has been slower for those in lower-paid jobs. In terms of rising house prices, Powell cited a sharp increase in demand fueled by low mortgage rates and fiscal stimulus. He expects “it is going to be a tight housing market for some time now because demand is just very, very high.”

Jerome Powell
Fed Chair Jerome Powell.

Across the pond, the European Commission is proposing a travel plan that would replace the current blanket ban for non-essential travel to the region that has been in place for about a year, according to the Guardian. People who have been fully vaccinated from countries with low infection rates could be allowed to travel to the EU by the start of June under a proposed vaccine passport system.

In the UK, a string of local and regional elections will be taking place on Thursday after being delayed last year due to the pandemic. The Bank of England will announce its latest monetary policy decision the same day.

“In terms of when they might begin to taper their Quantitative Easing operations, (economists) think it’s a close call between May and June, but ultimately the BoE will wait until June,” Deutsche strategists said.

London’s FTSE 100 rose 0.6%, the Euro Stoxx 50 was about flat, and France’s CAC 40 rose 0.2%.

Activity in Asian markets was somewhat muted by holidays in China and Japan on Tuesday. Hong Kong’s Hang Seng was up 0.8%.

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Global stocks ease as investors take profit after record highs on the back of strong economic data and robust earnings

2021 03 05T123827Z_3_LYNXMPEH240MQ_RTROPTP_4_GLOBAL MARKETS.JPG

Global stocks edged lower on Friday as investors digested a fusion of strong US economic data, continued Federal Reserve commitment, and better-than-expected earnings releases with caution.

Futures on the Dow Jones, S&P 500, and Nasdaq fell between 0.1% and 0.3%.

But the MSCI World Index, that tracks equity performance across 23 developed countries, rose 0.7% to its own record high.

The US economy grew at an annualized pace of 6.4% through the quarter that ended in March, versus 6.7% expected, leaving GDP less than 1% beneath its pre-COVID peak in the fourth-quarter of 2019. Adding to the recovery sentiment, US initial jobless claims dipped to 553,000 last week and marked a third straight decline.

The positive backdrop doesn’t mean that the current period of low volatility will persist, according to Mark Haefele, chief investment officer at UBS Global Wealth Management.

We expect bouts of market turbulence, as investors fret over rising inflation and the uneven global progress in combating the pandemic,” he said. “With global stocks close to record highs, the market is also likely to be vulnerable to disappointing news on the economy or COVID-19.”

On tech earnings, Amazon was the latest to post solid results on Thursday and saw shares rise 3.2% in after-market trading on a huge earnings beat in Jeff Bezos’ last quarter as CEO. Quarterly revenue rose 44% to $108.52 billion, and the company indicated that aspects of the pandemic bump in online sales may endure.

Twitter’s shares meanwhile slid 7% on its lower revenue outlook, even though quarterly revenue rose 28% to $1.04 billion. One issue for the company may be stronger ad revenues seen by rivals Google and Facebook earlier this week, Deutsche Bank strategists said.

Elsewhere in Europe, the French economy grew more than expected in the first three months of the year, with an expansion of 0.4% from the fourth quarter. Austria returned to growth after shrinking in the previous quarter, but Spain stagnated by 0.5% in the first three months of 2021.

London’s FTSE 100 rose 0.2%, the Euro Stoxx 50 rose 0.1%, and Germany’s DAX rose 0.5%.

Emerging markets such as Brazil and India continue to reel from a severe COVID-19 wave. Total fatalities in Brazil have topped 400,000, reporting more deaths so far in 2021 than in the whole of last year, as it struggles with vaccination.

India reported over 386,000 new cases in the past 24 hours, while related deaths rose by more than 3,400 in the same period. Several states have run out of vaccines ahead of a planned nationwide inoculation drive, according to Reuters.

More positively, BioNTech CEO Ugur Sahin said he’s confident the COVID-19 vaccine his company developed jointly with Pfizer will be effective against the variant found in India.

Asian shares traded lower against the backdrop of weak China data and a continued anti-trust crackdown on tech companies within the country. Growth in China’s services and manufacturing sectors fell short of expectations in April, signalling a drop in economic activity at the start of the second quarter.

China’s Shanghai Composite fell 0.8%, Japan’s Nikkei fell 0.8%, and Hong Kong’s Hang Seng fell 2.1%

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US futures soar and global stocks climb as investors cheer huge Apple and Facebook earnings

Apple CEO Tim Cook
Apple CEO Tim Cook.

US stock futures climbed sharply on Thursday in the wake of blowout earnings from Apple and Facebook, and after the Federal Reserve promised to keep up its support for the economy.

Nasdaq 100 futures jumped 1%, boosted by the big-tech earnings. S&P 500 futures rose 0.67% while Dow Jones futures climbed 0.43% as investors also mulled a major speech by President Joe Biden on his taxing and spending plans.

Booming iPhone sales helped Apple’s profit more than double and revenue soar in its latest fiscal quarter, year on year. The company’s shares rose 2.82% in pre-market trading after it announced a $90 billion share buyback program.

Facebook’s revenue also jumped, helped by soaring advertising prices. Its shares rallied 7.04% in pre-market.

The Federal Reserve’s latest interest rate decision added to the good mood in the market. The Federal Open Market Committee held interest rates near zero and pledged to keep buying bonds at a pace of $120 billion a month.

And Fed Chair Jerome Powell signaled that the central bank would keep up its support for the economy, despite the outlook brightening, saying: “We’re a long way from our goals.”

The dollar index fell after the decision and press conference, standing at 90.65 on Thursday, down more than 2.7% in April.

In the bond market, the yield on the key US 10-year Treasury note fell on Wednesday, but picked up again on Thursday morning to stand at 1.647%. Yields move inversely to prices.

“The Fed maintained their very dovish policy stance overnight despite acknowledging the robust US economic recovery at the start of this year,” Lee Hardman, currency analyst at Japanese bank MUFG, said.

“The lack of any hawkish policy shift last night from the Fed has encouraged an extension of the bearish US dollar trend that has been in place this month.” Low US interest rates tend to make dollar-denominated investments less attractive, which weighs on the currency.

Asian and European stocks climbed on Thursday, supported by the Fed and a raft of strong earnings. China’s CSI 300 rose 0.88%, while Japanese markets were closed for a public holiday.

Europe’s Stoxx 600 was up 0.49% in early trading, boosted by strong earnings from consumer goods company Unilever and oil major Shell.

Oil prices – which boosted Shell’s results – rose for the third day on Thursday. The improving outlook in many of the world’s biggest economies supported the market, despite the raging pandemic in India.

Brent crude oil climbed 0.58% to $67.16 a barrel, while WTI crude climbed 0.58% to $64.23 a barrel.

Investors were also weighing President Joe Biden’s Wednesday night speech to Congress, in which he laid out his plan to boost spending and raise taxes to support the US economy.

Biden proposed higher taxes on companies and the rich to pay for a big expansion of the social safety net. He said: “It’s time for corporate America and the wealthiest 1 per cent of Americans to pay their fair share. Just pay their fair share.”

Stocks initially fell when Biden’s plan to raise taxes on investments were first reported last week, but have since recovered strongly.

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Global stocks trade near record highs, but surging cases of COVID-19 in India and Japan hit oil

Traders and financial professionals work on the floor of the New York Stock Exchange
Traders and financial professionals work on the floor of the New York Stock Exchange

Global stocks held near record highs on Monday, while oil prices fell in response to rising Covid-19 cases in key consuming countries and related concerns about economic recovery in Asia.

US futures held flat. Nasdaq futures were last down 0.09%, S&P 500 futures were up 0.01% and Dow Jones futures were up 0.12%.

US investors are expecting a flurry of earnings and economic policy announcements this week. Federal Reserve Chairman Jerome Powell is due to give a press conference on Wednesday when the central bank concludes a two-day monetary policy meeting. Economists are not expecting significant changes, but investors will nonetheless scour every word for insight into the likely path of interest rates.

“The April FOMC meeting should primarily serve as a barometer check of the economic recovery relative to the substantial forecast upgrades the Committee unveiled at their last meeting in March.” Stephen Innes, chief global market strategist at Axi said. “He’s likely to continue his subtle shift in tone about the outlook in a more promising direction,” Innes added.

President Joe Biden will be delivering his first speech in a joint congressional session on Wednesday, where he will likely shed further light on his infrastructure spending plans. Investors will also get the first glimpse of how the US economy fared in the first three months of the year later this week.

US 10-year Treasury note yield rose to 1.577%, up 1.3 basis points.

Asian markets came under pressure from the surge in COVID-19 cases in India and elsewhere across the continent. China’s Shanghai Composite closed 0.95% down, Hong Kong’s Hang Seng Index was down 0.4% at the end of the trading day.

The Japanese Nikkei 225 continued to recover after last week’s mixed performance linked to lockdown extensions in the country and closed 0.36% up. The Bank of Japan is set to release rate decisions and its quarterly outlook on Tuesday, although no significant policy changes are expected.

Concern about the economic impact of another wave of Covid-19 also impacted oil prices. WTI crude oil prices were last down 1.14% and Brent crude oil was down 1.16% on Monday. Cases in India, the third largest oil consumer in the world, rose at record rates this weekend, leaving families of patients scrambling for hospital beds and oxygen.

“There have been reports that’s various models are predicting this could hit over 500,000 per day this week which will gain huge headlines. While Indian case loads are so high, there will be concerns about the unevenness of the global recovery and the ability of variants to escape,” Deutsche Bank research strategists said.

Ursula von der Leyen, the President of the European Commission said fully vaccinated Americans could travel to the European Union this summer, potentially providing some impetus for the long-haul travel and energy sectors, but this was not enough to prop up crude oil.

European stocks started flat on Monday, the pan-European Euro Stoxx 50 was last up 0.04%, the UK’s FTSE 100 was down 0.07% and the German DAX was up 0.14%.

Bitcoin recovered over the weekend and rose above $50,000 again, after a highly volatile week which saw the cryptocurrency reach record highs paired and lose significant ground. It was last valued at $52,772.93 on Monday.

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Global stocks wobble as concerns of rising COVID-19 virus cases overshadow robust earnings

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  • Concerns of recovery optimism affected world stocks on Wednesday, casting doubt on global growth.
  • The latest jump in case counts undermines the global recovery narrative, Deutsche strategists said.
  • Travel-related concerns prompted by fears of a COVID-19 variant in India is hanging over markets.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Global stocks were trading lower on Wednesday, as investors weighed up the potential economic impact of rising coronavirus cases across multiple regions in recent days.

The global rate of increase stands at the highest level since the start of the pandemic, as recorded cases are up by more than five million a week, according to Deutsche Bank strategists.

India reported over 2,000 virus-related deaths in the last 24 hours, while Turkey, Argentina, and Japan are also grappling with a new wave.

Futures on the Dow Jones, S&P 500, and Nasdaq were about flat, and suggested a steady open for US indices, which have hit record highs this week, later in the day.

The risk to markets is that the latest jump in case counts undercuts the narrative that the global economy is on an unstoppable path back to normality as vaccinations take place worldwide, Deutsche’s strategists said. Higher numbers also raise the odds of a more dangerous variant emerging that proves resistant to existing vaccines, they said.

On the earnings front, Proctor & Gamble smashed Wall Street estimates, as the company’s quarterly net sales rose 5% to $18.1 billion. Johnson and Johnson also topped estimates, reporting quarterly sales of $100 million of its COVID-19 vaccine. Meanwhile, Netflix shares dropped as much as 12% in after-hours trading as the company added fewer than 4 million customers in the first quarter, compared to the 6 million analysts expected.

Elsewhere in Europe, the UK reported inflation jumped from 0.4% to 0.7% in March, driven by higher costs of fuel and clothes. “The fact it fell short of the 0.8% forecast helped nip any inflationary pressure panic in the bud,” Connor Campbell, a financial analyst at SpreadEx, said.

Optimism over rising vaccination rates in the US, Britain, and Europe is for now overshadowing the question of the risk of the COVID-19 variant, or variants, in India.

London’s FTSE 100 rose 0.6%, the Euro Stoxx 50 rose 0.9%, and Germany’s DAX rose 0.4%.

Asian equities fell, as some countries questioned the outlook for global growth as Japan announced Tokyo would enter a state of emergency on April 29. China’s Shanghai Composite was about flat, Japan’s Nikkei fell 2%, and Hong Kong’s Hang Seng fell 1.6%.

Oil prices were dented by the escalating virus situation in India, which is the world’s third-largest importer of crude. Brent Crude fell 0.2%, to $66.42 a barrel, and West Texas Intermediate fell 0.3%, to $62.48 a barrel.

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Global stocks pull back from record highs as COVID-19 cases rise at the fastest rate since the pandemic began

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Global stocks edged below record highs on Tuesday as investors digested a sharp rise in COVID-19 cases around the world in one of the fastest rates since the pandemic began.

The VIX index, which is often referred to as Wall Street’s “fear gauge,” logged its biggest rise in three weeks by ticking up 1.04 basis points to 17.35, suggesting markets expect a rise in volatility over the next 30 days.

The global coronavirus case count is continuing to rise rapidly, with record case numbers being reported around the world. Japan is considering another virus state of emergency, the UK implemented a travel ban for visitors from India due to high case counts, and Argentina is being hit by a fierce second wave.

Numbers in the US are fairly stable, but that shadows a noticeable divergence between states, Deutsche Bank analysts said.

Separately, earnings this week could provide another catalyst that gives the overall market a sense of direction. United Airlines fell 2.1% after Monday’s close as the company indicated quarterly losses would continue until air travel bounces back to 65% of 2019 levels. Tesla fell 3.4% after two men died in one of its cars that Texas local authorities said were driverless.

Futures on the Dow Jones, S&P 500, and Nasdaq rose 0.2%, suggesting a slight rise in US indices later in the day.

Bitcoin dropped another 3% on Tuesday to around $54,000 – almost 18% lower from its all-time high last week.

Elsewhere in Europe, publicly-traded football clubs were among the biggest winners following news of the Wall-Street financed breakaway European Super League. Shares in the Italian club Juventus soared 17% in its best day since 2013, while Manchester United jumped 8%.

But plans by Europe’s biggest clubs to launch a separate competition have come under criticism, and politicians have stepped in. UK Prime Minister Boris Johnson tweeted these would be “very damaging for football and we support football authorities in taking action.”

Separately, the European Union on Monday expanded an advance purchase agreement to receive an extra 100 million doses of the Pfizer-BioNTech vaccine, taking the total number of doses delivered to the bloc to 600 million.

London’s FTSE 100 fell 0.2%, the Euro Stoxx 50 fell 0.3%, and Germany’s DAX rose 0.08%

Asia stocks retreated after investors followed weakness in the US tech sector’s corporate earnings.

China’s Shanghai Composite fell 0.2%, Japan’s Nikkei fell 1.9%, and Hong Kong’s Hang Seng rose 0.09%.

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Global stocks near record highs after economic data from the US and China highlights robust recovery

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Global stocks were trading near record highs on Friday after US jobless claims tumbled to a pandemic-era low and China said its economy grew 18% in the first-quarter of 2021.

The MSCI Index’s broadest gauge of global stocks edged up 0.05% in early European trade, just slightly lower than Thursday’s record peak.

Futures on the Dow Jones, S&P 500, and Nasdaq whipsawed between gains and losses, suggesting a mixed open when US indices start trading later in the day.

US jobless claims for the week through April 10 fell to 576,000, beating economist expectations of 700,000. That is the lowest unemployment figure since claims soared at the start of the pandemic.

Outperformance of technology stocks led the Nasdaq to gain 1.31% on Thursday, taking it to within half a percent of its record close. Yield on the 10-year Treasury fell 11 basis points on Thursday, before bouncing back to 1.58%.

Key figures released by Chain’s statistics bureau pointed to a continued rebound, but they are perhaps unusually strong in comparison with last year, when the economy contracted in response to the pandemic.

UBS said while investing at all-time highs may be daunting for some, it expects more upside ahead and predicts the S&P 500 could end the year at 4,400, roughly 5% higher than where it is right now.

“As the economic reopening accelerates in the coming months, we believe the bull market remains on a solid footing,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “We maintain a cyclical bias and prefer US consumer discretionary, energy, financials and industrials. We also retain our preference for value versus growth, as well as for small- and mid-caps over large-caps.”

Elsewhere in Europe, the head of Germany’s disease control agency said people need to drastically reduce contact to curb a third wave of coronavirus infections. Cases in the country were up by 31,117 on Thursday – the most since mid-January.

London-based research company Airfinity announced 1 billion doses of COVID-19 vaccines have been made so far. It forecasts the world could produce another billion doses in the next month alone as production ramps up.

London’s FTSE 100 rose 0.4%, the Euro Stoxx 50 rose 0.3%, and Frankfurt’s DAX ignored the health crisis in Germany and rose 0.5%.

Asian markets traded higher on the back of strong Chinese data.

“With the recovery happening as expected, the market anticipates that monetary policy will be normalized, and liquid margins tightened,” said Lynda Zhou, a portfolio manager at Fidelity International. “Overall, market sentiment remains fragile as it tends to react slowly to positive news and quickly to negative news.”

China’s Shanghai Composite rose 0.8%, Japan’s Nikkei rose 0.2%, and Hong Kong’s Hang Seng rose 0.8%

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Global shares edge higher as investors look past Archegos shockwave to COVID-19 developments, while US tech shares ease

trader Gregory Rowe

Global stocks rose on Tuesday, as investors shrugged off worries about wider fallout from the $35 billion Archegos default to focus instead on the worldwide progress of the COVID-19 vaccination program.

Futures on the Dow Jones rose 0.2% and the S&P 500 was about flat, suggesting a mixed open for US indices later in the day, while futures on the Nasdaq 100 fell 0.5%, pointing to a lower start for the technology sector. The Dow Jones hit an all-time high on Monday, but the tech-heavy Nasdaq saw a bigger pullback.

A spokesperson for Archegos, the family office of “Tiger cub” Bill Hwang, told Bloomberg in an email “all plans are being discussed” to determine the best path forward. Shares in banks linked to the risky trades didn’t see as much of a decline as Monday, when the financial sector was among the worst performing sectors of the European stock market.

US regulators have called in the banks involved for a “fireside chat,” according to Jeffrey Halley, a senior market analyst at OANDA.

Meanwhile, ViacomCBS fell a further 6.6%, losing more than half its value since a week ago, and Discovery fell another 1.6%.

“Just because markets appear to have moved on this morning, doesn’t mean the dust has settled on Archego Capital’s collapse,” Connor Campbell, a financial analyst at SpreadEx, said. “That situation could still have some nasty surprises up its sleeve.”

Separately in the US, President Joe Biden is expected to deliver a speech on infrastructure spending on Wednesday. The plan could cost as much $4 trillion in new outgoings and include $3.5 trillion in tax hikes, according to the Washington Post. The administration is not expected to expand the child tax credit permanent. Investors are also anticipating the next non-farm payrolls scheduled to release on Friday.

The 10-year US Treasury yield continued its march higher, rising 5 basis points to 1.77%, its highest since the start of the pandemic just over a year ago.

While Europe is at the forefront of a potential new wave of coronavirus infections, the US Center for Disease Control and Prevention has also warned the country risks facing a fresh wave of cases.

In the UK, Prime Minister Boris Johnson said he was hopeful no more lockdowns would be required as the country took its first significant step of easing out of restrictions on Monday.

London’s FTSE 100 rose 0.7%, the Euro Stoxx 50 rose 0.5%, and Germany’s DAX rose 0.6%.

The Ever Given ship in the Suez Canal was finally freed by a huge dredging vessel after being stuck for nearly a week, allowing normal traffic to resume. But the canal authority says it could take multiple days to clear out the backlog of ships that had built during the blockage. Oil prices were mostly tepid, with Brent crude falling slightly by 0.2% to $61.45 and West Texas Intermediate falling 0.1% to $64.87.

Asian markets received a boost from the Suez Canal news, helped by ByteDance’s latest $250 billion valuation in the private market. China’s Shanghai Composite rose 0.6%, Japan’s Nikkei rose 0.2%, and Hong Kong’s Hang Seng rose 0.8%.

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US stocks fall after a $30 billion wave of selling tied to hedge-fund Archegos rattles traders

NYSE trader worried
  • US stocks fell on Monday as traders braced for the after-effects of a selling-spree tied to hedge fund Archegos.
  • Archegos is the family office of former Tiger Management trader Bill Hwang.
  • Nomura and Credit Suisse shares tumbled after the banks warned of large losses linked to the fire-sale.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

US futures edged lower on Monday after an extraordinary $30 billion selling-spree by the hedge fund of Tiger Management trader Bill Hwang rattled investors around the world, while the refloating of a giant container ship stuck in the Suez Canal weighed on oil.

Futures on the Dow Jones, S&P 500, and Nasdaq fell between 0.4% and 0.6%, suggesting a lower open for US indices at the start of trading later in the day.

The sell-off appears to have been caused by Archegos Capital, run by the South Korean billionaire Hwang, which uses a long-short equity strategy that reduces exposure to movements in the overall market.

Typically under such a strategy, if long positions decline in value by more than the shorts, this puts them in a risky situation because they won’t have enough money to cover their shorts. The fund’s brokers, including Goldman Sachs and Morgan Stanley, realized this was about to happen, and so initiated margin calls. When Archegos couldn’t make them, the banks then forcibly sold off large holdings in the fund to stop the bleed.

Archegos had large long positions in Chinese and US stocks, including media firm ViacomCBS and Discovery. Both stocks saw their largest-ever daily declines on Friday, with each falling by more than 27%. Traders are now scrambling to figure out whether these fire-sales are over and seeing how much more the hedge fund has to offload.

A number of banking stocks tumbled after Nomura and Credit Suisse warned of large losses following Archegos’ extraordinary fire-sale. Nomura fell 16%, Credit Suisse fell 9.5%, Deutsche Bank fell 5%, and UBS fell 4%.

Wall Street’s VIX Index – popularly known as the ‘fear gauge’ – rose 10% to 20.78 on Monday, signalling a rise in the market’s expectations of volatility in the coming 30 days. The higher the index, the more nervousness is in the market.

Separately in the US, President Joe Biden is due to deliver a speech on Wednesday unveiling his new $3 trillion infrastructure plan that is part of his “Build Back Better” agenda.

Investors are still worried over concerns of rising number of COVID-19 cases in multiple regions in Europe, raising the prospect of further restrictions and curbs on economic activity. The continent is faced with a potential third wave driven by new variants. German Chancellor Angela Merkel said in a Sunday interview she would use federal law to take control of the pandemic response.

Lockdown restrictions in the UK have now eased slightly as groups of up to six people are allowed to meet outdoors. But markets displayed a lack of enthusiasm. “This early reticence may be tied to the Archegos Capital situation,” Connor Campbell, a financial analyst at SpreadEx, said. It remains to be seen which companies might be the next to announce they too have been stung, he said.

The UK’s FTSE 100 fell 0.4%, the Euro Stoxx 50 rose 0.1%, and Germany’s DAX rose 0.2%. The VDAX-New, the German equivalent of the VIX, was last up nearly 6% on the day.

Oil prices fell after the Ever Given container ship blocking the Suez Canal was successfully refloated, according to Inchcape Shipping Services. The ship, which has been stuck for almost a week, is currently being secured. Brent crude futures fell 0.6% to $63.99, while West Texas Intermediate dropped 1.2% to $60.27. The vessel, which is said to be longer than the Eiffel Tower, had obstructed the canal – one of the world’s most important shipping passages – since Tuesday.

Asian equity markets rose despite Chinese geopolitical worries and the forced liquidations on Wall Street, perhaps from the boost that the container ship has been refloated. Roughly 12% of total global trade passes through the canal, a large portion of that is from Asia’s big exporters to their customers in Europe. China’s Shanghai Composite rose 0.5%, Japan’s Nikkei rose 0.7%, and Hong Kong’s Hang Seng was about flat.

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