U.S. Futures, Stocks Sink on Manchin Shock, Virus: Markets Wrap

 U.S. Futures, Stocks Sink on Manchin Shock, Virus: Markets Wrap

(Bloomberg) — Investor sentiment sagged Monday amid turmoil for President Joe Biden’s economic agenda and rising global omicron infections, spurring selloffs in stocks, equity futures and oil while bolstering sovereign bonds.

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S&P 500, Nasdaq 100 and European futures slid at least 1%, and MSCI Inc.’s gauge of Asia-Pacific equities was set for its worst drop since March. Treasuries led global bonds gains and the dollar held a jump from Friday.

Senator Joe Manchin blindsided the White House on Sunday by rejecting Biden’s roughly $2 trillion tax-and-spending package, leaving Democrats with few options for reviving it. Goldman Sachs Group Inc. economists reduced their U.S. economic growth forecasts in the wake of the senator’s move.

Fresh lockdowns in parts of Europe to stem the rapid spread of omicron are also unsettling investors. In China, banks lowered the one-year loan prime rate, a key benchmark of borrowing costs, for the first time in 20 months. But that did little to shore up risk appetite.

Crude oil slid on worries that mobility curbs to tackle the strain will hurt demand. Commodity-linked currencies struggled, while the yen strengthened.

Markets are grappling with a range of uncertainties while heading toward a holiday period when thinner trading volumes can exacerbate swings.

“Omicron remains a concern and cases are on the rise,” said Robert Schein, chief investment officer at Blanke Schein Wealth Management. “Investors should be prepared for Covid to continue to be a main factor in market performance heading into 2022. After the bull run we’ve seen over the past 21 months, investors aren’t as used to prolonged periods of volatility.”

Global stocks retreated last week in part on an outlook of diminishing central bank stimulus as officials pivot toward fighting inflation. Federal Reserve Governor Christopher Waller said a faster wind-down of the central bank’s bond-buying program puts it in a position to start lifting interest rates as early as March.

Meanwhile, President Recep Tayyip Erdogan pledged to continue interest rate cuts, piling further pressure on the Turkish lira.

On the virus front, rising cases led the Netherlands to return to lockdown, while U.K. Health Secretary Sajid Javid refused to rule out stronger measures before Christmas. U.S. lockdowns likely won’t be necessary but hospitals may be strained, Biden’s top medical adviser Anthony Fauci said.

For more market analysis, read our MLIV blog.

What to watch this week:

  • Reserve Bank of Australia releases minutes of its December interest rate meeting. Tuesday

  • EIA crude oil inventory report Wednesday

  • Bank of Japan Governor Haruhiko Kuroda speaks Thursday

  • U.S. consumer income , new home sales, U.S. durable goods, University of Michigan consumer sentiment, initial jobless claims. Thursday

  • Friday: U.S. markets are closed. European markets close earlier

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 1.3% as of 6:50 a.m. in London. The S&P 500 fell 1% Friday

  • Nasdaq 100 futures fell 1.2%. The Nasdaq 100 fell 0.4% Friday

  • Japan’s Topix index lost 2.2%

  • Australia’s S&P/ASX 200 Index slid 0.2%

  • South Korea’s Kospi index declined 1.8%

  • Hong Kong’s Hang Seng Index fell 2%

  • China’s Shanghai Composite Index declined 1.1%

  • Euro Stoxx 50 futures declined 2.3%

Currencies

  • The Japanese yen was at 113.45 per dollar, up 0.2%

  • The offshore yuan was at 6.3874 per dollar

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was at $1.1254

Bonds

  • The yield on 10-year Treasuries fell four basis points to 1.36%

  • Australia’s 10-year bond yield declined five basis points to 1.54%

Commodities

  • West Texas Intermediate crude fell 3.9% to $68.12 a barrel

  • Gold was at $1,802.07 an ounce, up 0.2%

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