(Bloomberg) — European stocks fell, tracking markets lower in Asia, as concern about local government debt in China and hawkish language from a US central bank put traders on a risk-averse note.
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The Stoxx 600 fell 0.5%, snapping two days of gains and trimming its fourth weekly advance in five. US stock futures changed little and Treasury yields fell. The British pound led the gains among G10 currencies against the dollar after its strongest quarterly growth in more than a year.
Markets were shaky after San Francisco Reserve Bank President Marie Daley said the Fed still had “more work to do” to combat rising prices, dampening the impact of broadly positive inflation data on Thursday. In China, the government has moved to manage local government debt, a major threat to the country’s financial stability, while real estate developer Country Garden Holdings predicted a loss of billions of dollars in the first half of this year.
“The market price is still perfect,” wrote the strategists at J. Safra Saracen Bank, led by Carsten Junius. Valuations remain high, even on the basis of unanimously optimistic 2024 earnings numbers. This would be difficult to achieve in our base case scenario, which anticipates a slowdown cycle next year.” Junius and colleagues said they lowered their year-end target for eurozone equities.
Read more: Risk-off extends as cash attracts most investor inflows: Bank of America
In currencies, the Bloomberg Spot Dollar Index held steady after rising on Thursday. The dollar is set for its fourth week of gains, the longest such streak since February. Meanwhile, the continued decline in the value of the Australian dollar is starting to add to inflation fears.
“Our view that the US dollar’s upside is likely to be limited remains,” said Christopher Wong, currency analyst at Oversea Chinese Banking Corp. An inflection point can occur when the market narrative shifts to trading further interest rate cuts. And it could take several months, depending on how the data fizzles out.”
Australian, South Korean and Chinese stock indices fell, with the Hang Seng technology index falling 2.7%. All but one of the 30 index members declined, with Alibaba Group Holding Ltd. the only gainer after it beat revenue estimates in its latest quarterly results. Country Garden’s declines put a benchmark of Chinese real estate developers on track for its worst week since October.
Biden calls the Chinese economy a “time bomb” in a new game
In the commodities sector, oil was on track to end the week with little change ahead of a report from the International Energy Agency.
Main events this week:
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UK Industrial Production, Gross Domestic Product, Fri
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US University of Michigan Consumer Confidence, Producer Price Index, Friday
Some of the major movements in the markets:
Stores
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The Stoxx Europe 600 is down 0.5% as of 8:06 a.m. London time.
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S&P 500 futures rose 0.1%
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Nasdaq 100 futures rose 0.2%.
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Futures on the Dow Jones Industrial Average rose 0.1%.
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The MSCI Asia Pacific Index fell 0.7%.
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The MSCI Emerging Markets Index fell 0.9%.
currencies
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The Bloomberg Spot Dollar Index has not changed
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The euro rose 0.1 percent to $1.0994
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The Japanese yen was little changed at 144.67 against the dollar
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The external yuan was little changed at 7.2468 per dollar
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The British pound rose 0.3 percent to $1.2713
Digital currencies
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Bitcoin changed little at $29,428.03
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Ether hasn’t changed much at $1,848.34
bonds
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The yield on the 10-year Treasury note was little changed at 4.10%.
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Germany’s 10-year yield advanced five basis points to 2.58%
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The UK 10-year yield advanced seven basis points to 4.43%.
goods
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Brent crude fell 0.2 percent to $86.21 a barrel
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Spot gold rose 0.2 percent to $1916.52 an ounce
This story was produced with help from Bloomberg Automation.
– With assistance from Brett Miller and Wenjin Lv.
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