Stocks, Futures Fall Amid Growth, Valuation Risks: Markets Wrap

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(Bloomberg) — U.S. stock-index futures fluctuated and global stocks fell as investors assessed economic risks including a resurgent pandemic and China’s regulatory crackdown.

Contracts on the S&P 500 Index were down less than 0.1% after fluctuating between gains and losses, with money managers from Morgan Stanley to Citigroup turning cautious on U.S. equities. Europe’s Stoxx 600 gauge headed for the biggest decline in almost three weeks. Cryptocurrency-exposed stocks dropped in premarket trading as a selloff in Bitcoin continued.

Many investors have begun to see relative U.S. valuations as excessive even as growth in the rest of the world suffers from renewed lockdowns and travel curbs. They doubt the world is ready for an eventual tapering of central-bank stimulus even as inflation accelerates due to supply shocks. End-of-year seasonality and valuation concerns add to the gloomy mood.

“It appears that U.S. markets are concerned about the hoped-for post-pandemic recovery being somewhat less exuberant than hoped — a cold reality that places such as ASEAN and Australia have already had to accept,” Jeffrey Halley, a senior strategist at Oanda Asia Pacific Pte, wrote in a note. “That K-shaped recovery becoming more K-shaped.”

Morgan Stanley on Tuesday cut U.S. stocks to underweight and global equities to equal-weight, citing “outsized risks” to growth through October. Extremely bullish positioning means corrections can be amplified, Citigroup said. Credit Suisse Group AG on Wednesday said it has a small underweight on the U.S. market.

In Europe, growth concerns were compounded by speculation the European Central Bank is getting ready to slow down emergency stimulus. EQT AB slumped in Stockholm after partners in the private equity firm sold a part of their holdings earlier than expected.

Meanwhile, the continued spread of Covid-19 is curbing economic activity around the world. The Philippines backtracked on easing curbs in the capital region, while Japan may extend state of emergency orders. Taiwan identified a delta variant outbreak in New Taipei City.

Equities climbed for an eighth day in Japan, supported by hopes for economic stimulus from the next prime minister. Pakistan’s stocks benchmark slid to the lowest since May after MSCI downgraded the country to a frontier market from an emerging market.

Bitcoin posted second-day losses in the wake of El Salvador’s rocky implementation of a law that makes the cryptocurrency legal tender. Coinbase Global Inc. dropped 3.7% in premarket U.S. trading after the Securities and Exchange Commission warned the company against launching a product that would allow consumers to earn interest on their crypto holdings.

Cameco Corp. which has rallied 34% in the past seven trading days amid a surge in uranium prices, added 1.5% premarket.

Oil jumped as the continued impact of Hurricane Ida on U.S. output sent West Texas Intermediate futures up 1.5% to $69.37 a barrel.

What to watch this week:

U.S. President Joe Biden may make his choice this week on whether to renominate Fed Chair Jerome Powell to a second termDallas Fed President Robert Kaplan holds a virtual town hall discussion WednesdayECB President Christine Lagarde holds a press conference after the bank’s rate decision ThursdayChina PPI, CPI, new yuan loans, money supply, aggregate financing, Thursday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

Futures on the S&P 500 were little changed as of 9 a.m. New York timeFutures on the Nasdaq 100 were little changedFutures on the Dow Jones Industrial Average were little changedThe Stoxx Europe 600 fell 0.7%The MSCI World index fell 0.2%

Currencies

The Bloomberg Dollar Spot Index was little changedThe euro fell 0.2% to $1.1822The British pound fell 0.1% to $1.3766The Japanese yen was little changed at 110.25 per dollar

Bonds

The yield on 10-year Treasuries declined three basis points to 1.35%Germany’s 10-year yield declined one basis point to -0.34%Britain’s 10-year yield declined two basis points to 0.72%

Commodities

West Texas Intermediate crude rose 1.6% to $69.46 a barrelGold futures rose 0.1% to $1,800.50 an ounce

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