(Bloomberg) – Stocks fell along with U.S. stock futures on Thursday on a hawkish drumbeat from central banks and China risks, pushing the dollar higher as investors sought refuge from global market volatility .
Tech companies contributed to a nearly 2% decline in an Asian stock index, while S&P 500 and Nasdaq 100 contracts slid, the latter in part following a tumble in chipmaker Nvidia Corp. following a sale warning.
China’s decision to lock down the metropolis of Chengdu from Thursday to fight Covid also hurt sentiment. It is the largest Chinese city to face such restrictions since Shanghai’s deadly two-month crisis earlier this year.
The jitters come after the worst month since June for U.S. stocks, reflecting fears of an economic slowdown alongside tight monetary policy to curb inflation. The two-year Treasury yield hit 3.50% for the first time since 2007 amid a bond sell-off that also rattled Australian and New Zealand debt.
Commodity-linked and Group of 10 currencies weakened, while the yen fell to a new 24-year low, approaching the level of 140 to the dollar.
Stocks enter an often poor month for returns after an August of losses across all asset classes. A global stock gauge fell to a six-week low as the Federal Reserve pushes back bets on moderate rate hikes. Global bonds, meanwhile, are close to their first bear market in a generation.
The market is getting the message that the US central bank will fight inflation at all costs, Frances Stacy, chief strategy officer at Optimal Capital Advisors, told Bloomberg Radio. “I don’t think we’ve seen the bottom for this year,” she added.
No cuts
Cleveland Fed Chair Loretta Mester reiterated that the central bank must raise its benchmark rate above 4% by early next year. She said she does not expect a rate cut in 2023.
Elsewhere, oil was down, slipping to around $89 a barrel. Aggressive Fed tightening and slowing China are clouding the demand outlook. Bitcoin weakened, hovering around the closely watched $20,000 level.
The latest economic data has highlighted an alarming outlook for China. A private inquiry suggested that factory activity contracted in August, plagued by power shortages and Covid-related curbs.
Here are some key events to watch this week:
- Members of the ECB Governing Council are due to speak at an event from Tuesday to September 2
- U.S. nonfarm payrolls, Friday
- Voting for the UK leadership ends on Friday. Winner announced September 5
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Some of the major movements in the markets:
Shares
- S&P 500 futures fell 0.7% at 1:05 p.m. in Tokyo. The S&P 500 fell 0.8%
- Nasdaq 100 futures fell 1.2%. The Nasdaq 100 fell 0.6%
- Japan’s Topix index fell 1.4%
- South Korea’s Kospi index fell 1.9%
- The Australian S&P/ASX 200 index lost 1.9%
- Hong Kong’s Hang Seng index fell 1.5%
- China’s Shanghai Composite Index rose 0.2%
- Euro Stoxx 50 futures fell 0.9%
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro was at $1.0015, down 0.4%
- The Japanese yen was at 139.49 to the dollar, down 0.4%
- The offshore yuan was at 6.9167 to the dollar, down 0.1%
Obligations
- The yield on 10-year Treasury bills was 3.19%
- Australia’s 10-year yield rose 10 basis points to 3.69%
Goods
- West Texas Intermediate crude fell 0.3% to $89.31 a barrel
- Gold was at $1,706.45 an ounce, down 0.4%
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