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Futures Tumble As Tech Stocks, Cryptocurrencies Crash TUESDAY, FEB 23, 2021 – 7:44 Global stocks, US equity futures and cryptocurrencies all tumbled on Tuesday as the recent surge in inflation, bond yields and commodity prices continued to hammer technology shares while investors awaited fresh reassurance from U.S. Federal Reserve Chair Jerome Powell on the path for monetary policy in United States.
The MSCI world equity index fell 0.1% to fresh two-week lows, having earlier risen on gains in commodity-heavy equity indexes in Asia. After rising during the Asian session, S&P 500 futures also fell once Europen came online, and were last down 0.4%.
Nasdaq futures tumbled as much as 2%, and were last down 1.4% a day after the tech-heavy gauge posted its longest losing streak in four months. Heavyweight tech stocks slid premarket, with Apple -2.7%, Amazon -2.4%, Tesla -7.5%, Alphabet -1.6%. Tesla crashed 6% in pre-market trading, sliding below the $695 level at which it entered the S&P500. Tesla shares were set to plunge into the red for the year, hit by a fall of bitcoin, in which the electric carmaker recently invested $1.5 billion.
Adding to the risk off mood, Bitcoin resumed its recent plunge, plunging as much as 17% below $46,000, down over $12,000 from recent highs after a bout of volatility highlighted lingering doubts about the durability of the token’s rally.
“The prospect of a less dovish tone from central banks, sparked by rising inflation, is causing stock traders to reduce their exposure to equities, especially overbought sectors like tech,” said Pierre Veyret, analyst at ActivTrades in London. Another concern among investors is that broad benchmarks have already priced in much of the prospective global recovery spurred by vaccines and U.S. stimulus. Alongside rising inflation, another is that central banks may eventually start reconsidering emergency programs that have supported global markets.
Europe’s Stoxx 600 was down -0.8%, sliding as much as 1.6% earlier, with Tech stocks leading losses. European tech stocks were on set for their worst day in four months, down 2.7%, and the worst-performing index in Europe, as chip-equipment makers plunged amid market rotation out of more expensive sectors. Pandemic winners also dive. The index fell as much as 3.9% to a three-week low, the steepest intraday drop since Oct. 26. Chip- equipment makers, which have benefited amid a global shortage of semiconductors and are among the best-performing tech stocks in Europe this year, declined sharply: BE Semi -7.2%, ASMI -6.1%, ASML -3.4%. On the other end, mall operators, office landlords and events companies rose in Europe on increasing optimism about the prospects for reopening the Covid-hit economy following news that Germany mulled loosening the rules for easing lockdown restrictions. That followed the U.K. having set out an aim to gradually ease restrictions in stages over the next four months.
Here are some of the biggest European movers today:
Chip stocks fall on Tuesday, weighing on the Stoxx Tech Index, reflecting declines across U.S. semiconductor peers late Monday, as market rotation out of more expensive stocks and sectors gathers pace. Covestro shares jump as much as 3.4% before erasing gain in Frankfurt; Commerzbank says the company published a “strong” 1Q outlook, but a cautious view on 2Q to 4Q, leaving upside to consensus. U.K. domestically oriented stocks gained on Tuesday as travel and entertainment shares surged after Prime Minister Boris Johnson announced plans to reopen the economy. KPN shares tumble as much as 10%, their biggest one-day drop since June 2016, as America Movil sells around EU2.2b of bonds exchangeable into shares in the Dutch phone company. Adyen shares drop as much as 4.5% to a two-week low of EU2,056, after a pre-IPO investor sells shares in the payments firm. Earlier in the session, Asian stocks rose clearly unaware of the shitstorm that was about to be unleashed by European traders, with equity benchmarks in Thailand and Hong Kong the biggest gainers in the region. The SET Index jumped as much as 2%, with tourism and leisure stocks rallying the most on the gauge amid optimism over the arrival of Covid-19 vaccines and relaxation of pandemic-led restrictions. Casino operators Galaxy Entertainment Group and Sands China surged to be among the top gainers on the Hang Seng Index, after Macau reopened to quarantine-free travel from mainland China. Energy was the top-performing sector in Asia as oil surged toward $63 a barrel. Investment banks and traders predicting the market will tighten further and push prices higher. Technology was the worst performer. The MSCI Asia Pacific Index headed for its first gain in four sessions, with equity benchmarks in Australia and Singapore also rising. Stocks were lower in South Korea and Malaysia, while Japanese markets were shut for a holiday.
India stocks ended little changed, after swinging between gains and losses several times in the session. The S&P BSE Sensex closed marginally higher at 49,751.41 in Mumbai, while the NSE Nifty 50 Index added 0.2%. Both gauges had retreated more than 4% through Monday from record highs on Feb. 15. Reliance Industries Ltd. gave the biggest boost to both measures after saying it plans to spin off its oil-to-chemicals operation into an independent unit. A gauge of metal companies was the top performer among the 19 sector indexes compiled by BSE Ltd
Rising inflation bets spurred by the global economic recovery have hammered stocks in the past week. The level of angst was also reflected in various equity volatility gauges which rose to multi-week highs, while on bond markets German and U.S. yields moved in different directions, even though both remained just below the highs hit on Monday.
After being knocked off from eight-month high by European Central Bank chief Christine Lagarde signalling discomfort with the recent surge in yields, 10-year Bund yields resumed their upward trend and were last at -0.297%.
In rates, Treasuries steadied on Tuesday, below Monday’s one-year high of 1.394% and were last at 1.360%. Yields were cheaper by ~1bp across long-end of the curve, steepening 5s30s by ~2bp after the 5s30s touched the highest level in more than six years. A wider bear-steepening move in under way in bunds, which trade 4bp cheaper vs Treasuries. The curve steepened, pivoting around a little-changed 10-year sector. Month-end re-balancing flows are moving into focus as traders anticipate rotation into bonds. Auction cycle begins with 2-year notes, while Fed Chair Powell delivers semi-annual monetary policy report. Most peripheral and semi-core spreads widen to Germany; Italy outperforms, tightening ~1bps at the long end
Traders will be waiting to hear from Fed Chair Jerome Powell when he testifies to the Senate Banking Committee on Tuesday and the House Financial Services panel the following day. He’s expected to be reassuring on the central bank’s dovish stance when he gives his congressional testimony at 1500 GMT in Washington, and to play down the risk of inflation despite the size of President Joe Biden’s $1.9 trillion coronavirus relief proposal.
“Fed Chair Jay Powell will be torn today,” ING analysts led by Padhraic Garveywrote in a anote. “A bit of inflation is a good thing; it’s what the Fed has wanted. But too much anticipation of it is not good, as it tightens policy prematurely.”
“If there were already any expectations that Powell could try to calm down rates, then (Lagarde’s remarks) have just further cemented them,” said Giuseppe Sersale, strategist and fund manager at Anthilia in Milan.
In currency markets, the dollar briefly dropped to its lowest since Jan. 13 before advancing against most G-10 peers, with traders waiting to see if Powell will address the selloff in Treasuries. The pound led G-10 gains, nearing $1.41 as investors digested the U.K.’s plan to open up the economy. The Canadian dollar outperformed most peers as oil prices continued their ascent. The dollar index was up 0.1% at 90.137, with the euro flat at $1.215.
Commodity prices strengthened again with Copper extending gains, while WTI crude rose toward $63 a barrel. Oil prices jumped by more than $1 at one point, underpinned by optimism over COVID-19 vaccine rollouts and lower output as U.S. supplies were slow to return after a deep freeze in Texas shut in crude production last week. Brent crude was last up 0.7% at $65.7 a barrel after earlier hitting a fresh 13-month high of $66.79, while U.S. crude rose 0.8% to $62.17 a barrel.
“Oil has been caught up in the broader commodities move higher, with a weaker USD proving constructive for the complex,” ING strategists led by Warren Patterson said in a note. “Meanwhile, there is also a growing view that the oil market is looking increasingly tight over the remainder of the year”.
Copper prices meanwhile hit a 9-1/2-year high as tight supply and solid demand from top consumer China boosted sentiment.
To the day ahead, and the highlight will be the aforementioned appearance of Fed Chair Powell before the Senate Banking Committee. Otherwise, data releases from Europe include UK unemployment for December and the final Euro Area CPI reading for January, while from the US there’s the Conference Board’s consumer confidence indicator for February, the Richmond Fed’s manufacturing index for February and the FHFA house price index or December. Lastly, earnings releases include Home Depot, Medtronic and Intuit.
Market Snapshot
S&P 500 futures down 0.3% to 3,860.50 SXXP Index down 1.2% MXAP up 0.1% to 216.65 MXAPJ up 0.3% to 725.81 Nikkei up 0.5% to 30,156.03 Topix up 0.5% to 1,938.35 Hang Seng Index up 1.0% to 30,632.64 Shanghai Composite down 0.2% to 3,636.36 Sensex little changed at 49,720.21 Australia S&P/ASX 200 up 0.9% to 6,839.17 German 10Y yield up 4 bps to -0.30% Euro little changed at $1.2155 Kospi down 0.3% to 3,070.09 Brent futures up 1.2% to $66.03/bbl Gold spot down 0.2% to $1,806.15 U.S. Dollar Index up 0.1% to 90.14 Top Overnight News from Bloomberg
The U.K.’s finance minister Rishi Sunak is set to spend billions of pounds in extra support for the economy over the next four months, as pandemic curbs pushed unemployment to its highest level in almost five years Copper rose to the highest level in over nine years as a rally in industrial metals showed little sign of abating amid a global recovery from the pandemic European Central Bank President Christine Lagarde said her institution is “closely monitoring” the market for government bonds, in a sign that she might act to prevent rising yields undermining the economic recovery from the pandemic Oil extended gains near $62 a barrel with investment banks and traders predicting the market will tighten further and push prices higher Commodities rose to their highest in almost eight years amid booming investor appetite for everything from oil to corn. The Bloomberg Commodity Spot Index, which tracks price movements for 23 raw materials, rose 1.6% on Monday to its highest since March 2013 In Brazil, investors unloaded everything from state- run companies to bonds and the currency after President Jair Bolsonaro ousted the head of oil giant Petrobras, sparking worries of government meddling and a break with his administration’s market-friendly pledges Japan is planning to lift the state of emergency in places outside the Tokyo metropolitan area earlier than planned, with falling numbers of coronavirus cases easing the strain on hospitals, the Asahi newspaper reported Tuesday U.S. deaths passed the 500,000 mark on Monday. Global deaths related to Covid-19 have surpassed 2.46 million, with the U.S. leading all countries with more than twice the number recorded by the next closest, Brazil, according to Bloomberg’s virus tracker
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