European stock futures fall as China rally stalls: Markets close

(Bloomberg) — European shares are poised to fall, tracking weakness in Asian shares as a global rally in Chinese stocks is halted. Oil extended gains amid concerns over escalating tensions in the Middle East.

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Euro Stoxx 50 index futures fell 0.4 percent, while U.S. stock futures fell 0.2 percent. A gauge of Chinese shares in Hong Kong fell 1.6 percent, ending a 13-day winning streak. Japanese stocks gained on a weak yen. Markets in mainland China remain closed for Golden Week.

The pound weakened after The Guardian reported that Bank of England Governor Andrew Bailey backed the prospect of “slightly more aggressive” interest rate cuts.

There is “profit-taking as stimulus momentum has stalled with China on holiday,” said Charu Chanana, global markets strategist at Saxo Markets. “Markets still remain uncertain about the impact of announcements to address China’s structural headwinds.”

European traders will head to their offices amid growing headwinds for companies in the region, with French President Emmanuel Macron approving a temporary tax on the country’s biggest companies. US prosecutors have widened an investigation into potential price-fixing by German software maker SAP SE and technology reseller Carahsoft Technology Corp.

Japan’s Topix index rose more than 1 percent after new Prime Minister Shigeru Ishiba said on Wednesday the economy was not ready for another interest rate hike, sending the yen lower. Japan’s currency fell 0.2 percent to 146.78 per dollar on Thursday, after falling 2 percent a day earlier.

The dollar’s renewed strength added pressure on the yen as Wednesday’s stronger-than-expected ADP jobs data prompted traders to back off bets on aggressive rate cuts from the Federal Reserve. Swap traders penciled in about 33 basis points of policy easing at the central bank’s November meeting, down from 44 basis points just last week.

Global stocks are poised for their first weekly loss in four weeks amid the lingering threat of escalating geopolitical tensions in the Middle East as well as speculation over the pace of Fed easing. Investors will focus on Friday’s non-farm payrolls data to further gauge the size of the Fed’s next rate cut.

“Following initial jitters over geopolitical risks in the Middle East, Asian markets managed to regain some composure in today’s session,” said Jun Rong Yeap, market strategist at IG Asia Pte. “The question has been about how aggressive Israel’s response will be and whether energy infrastructure will be affected, but it is expected that more clarity could take some time,” he said.

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Oil rose as investors awaited Israel’s response to Iran’s missile attack, with US President Joe Biden urging Israel not to attack Iran’s nuclear facilities.

The Bloomberg Dollar Index gained for a fourth day, supported by rising Treasury yields. The U.S. 10-year yield rose one basis point to 3.79 percent in Asian trade, after rising five basis points in New York amid the crisis in Middle East tensions.

Key events this week:

Some of the main movements in the markets:

Stocks

• S&P 500 futures were down 0.2% as of 2:56 p.m. Tokyo time

• Nikkei 225 futures (OSE) rose 2.2%

• Japan’s Topix rose 1.1%

• Australia’s S&P/ASX 200 was little changed

• Hong Kong’s Hang Seng fell 1.9%

• Euro Stoxx 50 futures fell 0.4%

Coins

• Bloomberg Dollar Spot Index rose 0.2%

• The euro fell 0.2% to $1.1028

• The Japanese yen was little changed at 146.58 per dollar

• The offshore yuan was down 0.1 percent at 7.0458 per dollar

Cryptocurrencies

• Bitcoin rose 0.4% to $61,161.35

• Ether was little changed at $2,383.44

BONDS

• The 10-year Treasury yield was little changed at 3.79%

• Japan’s 10-year yield was little changed at 0.815%

• Australia’s 10-year yield rose six basis points to 4.02%

commodities

• West Texas Intermediate crude rose 1.3% to $71.03 a barrel

• Spot gold was down 0.2% at $2,653.84 an ounce

This story was produced with the help of Bloomberg Automation.

–With assistance from Winnie Hsu and John Cheng.

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