Asian Stocks Set to Dip Amid China Risk, U.S. Drop: Markets Wrap

(Bloomberg) — Most Asian stocks looked set to retreat Wednesday after Wall Street snapped a winning run as a rout in China spurred caution and traders evaluated megacap technology earnings. Treasuries rallied.

Equity futures fell in Japan and Australia but rose in Hong Kong, where stocks have plunged on a regulatory crackdown that’s forcing investors to ask how far Beijing will go to curb the power of its big companies. Chinese shares in the U.S. have succumbed to a record drop and the offshore yuan has weakened.

The tech-heavy Nasdaq 100 posted its biggest decline in more than two months as all three of the major American equity indexes fell from all-time highs. While earnings have supported U.S. shares, traders are now evaluating results from Apple Inc., Microsoft Corp. and Alphabet Inc. Alphabet rose in extended trading, while Apple and Microsoft slipped. U.S. equity contracts declined.

Treasuries were boosted by the flight-to-quality sparked by the China selloff and a solid 5-year auction. A gauge of the dollar retreated for a second day in U.S. hours.

The rout in Chinese stocks is adding to global market unease, with investors already concerned about the economic recovery given the spread of the Covid-19 delta variant. Markets are also awaiting this week’s Federal Reserve meeting, where officials are expected to consider when and how to taper the central bank’s $120 billion in monthly bond purchases.

“The turmoil in tech stocks in China is finally bleeding into U.S. tech stocks,” said Chris Murphy, Susquehanna International Group’s co-head of derivatives strategy. He added that he’s “concerned investors will lighten up in general” after major tech earnings heading into “a seasonably weak period for equities.”

Elsewhere, oil was trading just below $72 a barrel and Bitcoin around $38,000.

Here are some key events to watch this week:

• Facebook, Amazon report earnings this week
• Federal Reserve policy meeting concludes Wednesday
• U.S. GDP data are due Thursday

Here are the main moves in the markets:

Stocks

• S&P 500 futures declined 0.3% as of 7:02 a.m. in Tokyo. The S&P 500 fell 0.5%
• Nasdaq 100 futures shed 0.4%. The Nasdaq 100 fell 1.1%
• Nikkei 225 futures fell 1.4%
• Australia’s S&P/ASX 200 futures lost 0.3%
• Hang Seng Index futures rose 0.8% earlier

Currencies

• The Japanese yen was at 109.77 per dollar
• The offshore yuan was at 6.5269 per dollar
• The Bloomberg Dollar Spot Index fell 0.2%
• The euro traded at $1.1818

Bonds

• The yield on 10-year Treasuries declined five basis points to 1.24%

Commodities

• West Texas Intermediate crude added 0.3% to $71.87 a barrel
• Gold was steady at $1,800.35

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