Stocks slipped Tuesday with a Chinese regulatory crackdown
casting an overhang over the market.
Hong Kong's Hang Seng Index slumped as a selloff of tech stocks
deepened, driven by concerns about China's regulatory crackdown in
The meltdown in China is weighing on investors' appetite for
stocks in other markets, but the contagion effect is likely to be
limited, according to Altaf Kassam, head of investment strategy for
State Street Global Advisors in Europe.
"The drag on sentiment will be there because China has been the
engine of global growth for years now and seeing its stock market
suffer like this is going to put a question mark on global growth,"
Mr. Kassam said.
"Anything that weighs on global growth is going to have an
effect on markets, but it is going to be a second-order story for
Social-media giant Tencent Holdings fell 9% while Hong
Kong-listed shares of Alibaba Group, China's biggest e-commerce
company, shed more than 6% by the close of trading.
"A sense of caution is likely to linger across markets as
investors adopt a guarded approach due to the Asian volatility and
Federal Reserve policy meeting on Wednesday," said Lukman Otunuga,
senior research analyst at FXTM.
In Europe, sentiment among German exporters has worsened, the
Ifo Institute said. Ifo's export expectations fell to 24.5 points
in July from 25.0 points in June.
"Overall, however, German exports continue to perform very
well," Clemens Fuest, president of the Ifo Institute, said. Almost
all industries expect exports to increase, he said.
Stock futures ticked lower as investors awaited earnings reports
from the biggest technology giants and data on the manufacturing
U.S. stocks have been grinding higher as investors cheered
strong corporate results and upbeat guidance from some of the
largest American businesses. At the same time, concerns are
lingering over the Delta-variant of Covid-19, supply-chain
problems, a spike in inflation and cooling economic growth.
"We've been characterizing this market as a jetliner that has
lifted off and is coming out of the Covid-19 air pocket, but is
still trying to find an appropriate cruising altitude," said Kara
Murphy, chief investment officer at Kestra Holdings. "We are seeing
economic data going from great levels to good levels: that is still
indicative of economic growth."
Earnings reports from behemoths including Microsoft, Apple and
Google-parent Alphabet after markets close Tuesday could offer
insights into how those companies are faring as lockdowns end and
supply constraints for key products persist. Visa and Starbucks are
also among the companies that will publish results, making it a
blockbuster day in the earnings season.
Other blue chip firms set to post results before markets open
include United Parcel Service, General Electric, 3M and Raytheon
"We have seen earnings expectations continue to be ratcheted up
quite significantly, but lots of companies are still beating
expectations," said Ms. Murphy.
Investors will be able to parse data indicating the strength of
the economic rebound later on Tuesday. U.S. durable goods orders
for June, due at 8:30 a.m. ET, are forecast to rise for a second
consecutive month as demand remains strong. Still, manufacturers
have struggled to keep up amid supply bottlenecks and difficulties
finding workers. Data on consumer confidence is also due to be
released at 10 a.m. ET.
The Federal Reserve kicks off its two-day meeting, and the
economics calendar for Tuesday includes durable-goods orders data
for June, consumer confidence index for July and the latest
Case-Shiller home price index.
The dollar isn't set for any "meaningful moves" against other
major currencies ahead of the conclusion of the Federal Reserve's
policy meeting on Wednesday, but it may edge higher given Fed
officials could offer more details about discussions on a possible
scaling back of bond purchases, ING said.
"While no Federal Reserve policy changes are expected in July's
meeting, we could hear more about the tapering discussions that
started in June," it said.
ING says there is a growing "hawkishness"--or bias toward
tightening monetary policy--among some Fed policy makers given the
strong U.S. economy and the fact that inflation is running at more
than double the central bank's 2% target.
The pound should rise through next year as an improving U.K.
economic outlook brings the Bank of England closer towards
withdrawing stimulus, MUFG Bank said.
While U.K. coronavirus cases are expected to increase after the
final easing of England's restrictions last week, rising levels of
immunity from vaccines and those who have already had Covid-19 will
help slow the spread, MUFG currency analyst Lee Hardman said.
"The reduced risk of further Covid-related disruption would help
to support the BOE's forecast for a robust recovery this year for
the U.K. economy."
That means the BOE is inching towards tightening policy,
although it will be a gradual process, Hardman said.
The yield on the benchmark 10-year U.S. Treasury note ticked
down to 1.249% from 1.276% on Monday. Bond yields and prices move
in opposite directions.
Any dip in economic activity will justify the stance of major
central banks to keep their hugely accommodative policies in place
longer, but many of these factors are already priced into U.S.
Treasury markets, said Mark Holman, chief executive officer of
TwentyFour Asset Management.
"Whilst this political kink in the road may create some further
temporary inflationary pressure, it also serves to take some of the
heat out of the growth, which should help keep Treasuries more
stable, the disruption of which we think is key for risk markets in
Q4," he said.
From a fixed-income credit risk perspective, this isn't expected
to materially change the fundamental outlook, Holman said.
Oil prices waver around flat. Investors will be watching out for
American Petroleum Institute data due later Tuesday and Department
of Energy figures due out Wednesday.
The wild swings seen in oil prices over recent weeks may have
calmed for the moment but natural gas prices in Asia remain firm,
with hotter than usual weather in North-East Asia raising air
conditioner usage, said ING's Warren Patterson.
In Europe, too, gas prices remain near record highs, though the
return of the Nord Stream pipeline from maintenance should ease
those pressures, he added.
Metals prices slipped as China's regulatory crackdown hits risk
assets and boosts safe-havens like the dollar.
Three-month copper on the LME was down 1.7% at $9,692 a metric
ton while aluminum fell 0.2% to $2,498.50 a ton and nickel dropped
2.2% to $19,280 a ton.
The ICE Dollar Index rose weighing on dollar-denominated
commodities such as base metals and gold.
"The never ending mantra from Beijing of speculative activity is
bad and unacceptable is hitting home," says Malcolm Freeman, CEO of
metals brokerage Kingdom Futures.
Reckitt Benckiser Swung to 1H Loss on Higher Costs
Reckitt Benckiser Group PLC reported on Tuesday a swing to
pretax loss for the first half of the year on lower revenue and
The consumer-goods company--which houses Dettol, Harpic and
Durex among its brands--posted a pretax loss of 1.94 billion pounds
($2.68 billion) for the six months, including a hit of GBP3.20
billion from losses on assets held for sale and disposal of
goodwill and brands. This compares with a profit of GBP1.44 billion
in the year-earlier period.
Investor Cat Rock Urges Just Eat Takeaway to Explore
Combinations, Sell Assets
U.S. investor Cat Rock Capital Management LP said Tuesday that
Just Eat Takeaway.com NV should explore combinations with other
global players and sell noncore assets, putting pressure on the
Grubhub owner to address its share performance.
The investor--which owns 4.7% of the Amsterdam-based
food-delivery company's shares and is one of its top ten
shareholders--said Just Eat Takeaway should invest the money raised
from asset sales in its growth and to buy back the shares used
toward the Grubhub acquisition. Cat Rock also called on the company
to improve transparency on the expected magnitude, composition and
returns of its investments to boost its standing in capital
Credit Suisse Taps Goldman Executive as Post-Archegos Chief Risk
Credit Suisse Group AG hired a top executive from Goldman Sachs
Group Inc. as its chief risk officer, part of an effort to get a
better grip on risks after losing $5.5 billion from family
investment firm Archegos Capital Management.
David Wildermuth, formerly deputy chief risk officer at Goldman,
will join the executive board and take over from Joachim Oechslin,
who held the role temporarily. Credit Suisse's former chief risk
officer, Lara Warner, was pushed out in April after the Archegos
loss and the separate collapse of a financing partner, Greensill
Randstad Swung to 2Q Net and Pretax Profit as Revenue Rose
Randstad NV reported Tuesday a swing to a net and a pretax
profit for the second quarter of 2021, boosted by
stronger-than-anticipated revenue for the period, and said it's
confident for its full-year performance.
The Dutch staffing company reported a net profit of 174 million
euros ($205.4 million) compared with a net loss of EUR59 million
for the same period a year earlier.
LVMH Books Higher 1H Revenue, Profit as Fashion Sales Surge
LVMH Moet Hennessy Louis Vuitton SE's earnings rose sharply in
the first half as sales jumped by more than half on the year,
driven by the core soft-luxury division.
The French luxury-goods giant said Monday that it made an
operating profit of 7.63 billion euros ($8.98 billion) in the six
months to end-June, nearly fives times as much as the previous-year
period, and some 44% higher than in the same period of 2019. Sales
increased to EUR28.67 billion from EUR18.39 billion previously.
Aon, Willis Towers Scrap $30 Billion Merger Amid Antitrust
Aon PLC and Willis Towers Watson PLC abandoned a more than $30
billion tie-up to create the world's largest insurance broker,
deciding it wasn't worth pursuing in the face of Justice Department
opposition to the merger.
The DOJ filed a lawsuit against the deal last month, the first
big test of the Biden administration's more muscular antitrust
policy. The suit, filed in a federal court in Washington, said that
the proposed merger would lead to higher prices and reduced
innovation for U.S. businesses, employers and unions that rely on
Covid-19 Vaccine Pioneer BioNTech Plans to Make New Malaria and
Tuberculosis Shots in Africa
BioNTech SE said it would invest some of the profits from the
Covid-19 vaccine it markets with Pfizer Inc. into developing shots
for malaria and tuberculosis in Africa, part of the German
company's plan to establish a large production hub for innovative
medicines on the continent.
The biotech firm plans to build a factory in Africa and develop
a manufacturing network with local partners to transfer its
technology based on messenger RNA, a genetic molecule, to a
continent that has suffered from a lack of access to vaccines and
other lifesaving treatment, BioNTech Chief Executive Ugur Sahin
Barclays Overtakes Credit Suisse in Investment Banking
Barclays PLC recently overtook Credit Suisse Group AG in
investment banking revenue, a sign that the U.K. bank's long,
frustrated push to be a major player is making progress thanks in
part to the troubles of its Swiss rival.
The London-based bank vaulted past its Zurich-based counterpart
to be the largest investment bank outside the U.S. in the second
quarter of this year with $1.26 billion of investment banking
revenue, representing a 4.1% market share, according to Dealogic.
JPMorgan Chase & Co. was the top investment bank during the
quarter with $3.15 billion of revenue, a 10.1% market share.
Stocks Keep Climbing, Avoiding Routine Pullbacks
The stock market has been relatively quiet lately.
The benchmark S&P 500 hasn't suffered a 5% pullback since
October and has advanced 35% since the end of that month.
Chinese Tech Stock Selloff Deepens
HONG KONG-Chinese technology shares dropped Tuesday, extending
steep declines in the previous session that were fueled by investor
concerns about China's widening series of crackdowns on tech and
By early afternoon in Hong Kong, online gaming and social-media
giant Tencent Holdings Ltd. had fallen 6.7%. The selloff pushed
Tencent's market value down to about $563 billion, according to
FactSet-meaning it has lost about $379 billion of market
capitalization since peaking in mid-February.
Beijing Gives Tech Investors a Brutal New Tutorial
Anyone who bought into Chinese internet stocks hoping for a
bounce following the dramatic fall from grace of ride-hailing giant
Didi has been taught another painful lesson this week. Fighting the
Fed, or Washington, is usually a losing game-but betting against
Beijing's fast-moving, often opaque regulatory apparatus in Xi
Jinping's new era of centralized control is suicidal.
Chinese tech stocks already punished by a widening antitrust and
data-security crackdown have lost billions of dollars in market
value over the past few days as a new selloff hit almost every
single company in the sector. The immediate trigger: new rules that
would basically wipe out much of the booming after-school tutoring
sector. While tightening regulations have long been on the horizon,
the scope and severity of the crackdown still caught investors by
surprise. Goldman Sachs has cut its market-size forecast for
after-school tutoring in 2025 by 85%. Shares of New Oriental
Education have lost 70% since Friday, when the news was first
Big Pharma Quietly Pushes Back on Global Tax Deal, Citing
Big drug companies and their lobbyists have a message for
Congress: Don't raise taxes on the industry that brought you
fast-tracked Covid-19 vaccines.
Pharma executives, lobbyists and consultants are mobilizing to
fight what has become a threat to drug companies' bottom lines: a
sweeping agreement by many of the world's biggest economies to
better harmonize corporate taxation around the globe. Earlier this
month, 130 countries agreed to broad outlines of a deal that would,
among other steps, establish a minimum corporate tax of 15% within
their countries, reducing opportunities for international tax
Bitcoin Jumps to a Six-Week High
The price of bitcoin jumped to a six-week high Monday, with some
investors attributing the rally to short positions being liquidated
and speculation that Amazon.com Inc. may be venturing into digital
Bitcoin soared as high as $40,501.70, according to Dow Jones
Market Data, reaching its highest level since mid-June. It rose 9%
from its 5 p.m. EDT level Sunday. Rival currency Ether jumped
Infrastructure-Bill Negotiators Try to Overcome Late Hurdles
WASHINGTON-A push to complete a roughly $1 trillion
infrastructure agreement hit a series of hurdles Monday, as aides
squabbled over funding for water infrastructure and how to apply a
requirement that federal contractors pay their employees a locally
prevailing wage, among other issues.
Lawmakers had previously set Monday as a target for closing out
their talks and beginning floor consideration of the emerging
agreement, though that timeline seemed to slip as the two sides
sniped at each other.
China Industrial Profit Data for June Signal Relatively Strong,
if Uneven, Recovery
China's industrial profit rose 20.0% from a year earlier in
June, slowing from May's 36.4% expansion as favorable low-base
The profitability of China's industrial companies looks
relatively strong as more than 70% of those surveyed reported
higher profits than what they earned before the coronavirus
pandemic, said the National Bureau of Statistics.
Chinese Officials Blame U.S. for Stalemate in High-Level
TAIPEI-Senior U.S. and Chinese officials sparred over Covid-19,
human rights and cybersecurity during a tense exchange Monday in
the highest-level meetings between the two countries on Chinese
soil since Joe Biden became president.
Chinese Vice Foreign Minister Xie Feng, meeting with U.S. Deputy
Secretary of State Wendy Sherman in the port city of Tianjin on
Monday, said American perceptions of China as an "imagined enemy"
were responsible for a stalemate in relations between the two
Foreign Purchases of U.S. Homes Fall to New Low
Foreign purchases of U.S. homes declined for a fourth straight
year as the Covid-19 pandemic sharply limited international
Foreigners bought $54.4 billion in U.S. residential real estate
in the year ended in March, down 27% from the prior year, according
to a report released Monday by the National Association of
Realtors. That is the lowest level on record since NAR began
collecting the data in 2011.
Biden Administration Moves to Tilt Pay and Power Toward
President Biden is advancing a series of regulatory changes
aimed at increasing workers' pay and gaining them other benefits,
moves that opponents say could burden businesses amid an uneven
The rule changes, most of which are still in progress, would
affect workers such as federal contractors, tipped employees and
workers who are jointly employed, such as those with jobs at
franchised brands. In some cases, the changes seek to reverse Trump
administration efforts. In others, the Labor Department is working
to implement its own rules.
Vatican Tries Cardinal in Test of Pope's Transparency Drive
VATICAN CITY-Cardinal Giovanni Becciu, once one of the most
powerful men in the Vatican, went on trial Tuesday for embezzlement
and other alleged crimes, as a scandal that has posed one of the
biggest tests of Pope Francis's pontificate spilled out into the
It is the first time that a cardinal has gone on trial in
Vatican City's criminal court.
U.S. Moves to Assure India on Afghan Withdrawal, Regional
Secretary of State Antony Blinken is visiting India this week as
the Biden administration seeks to reassure a key Asian partner over
the U.S. and allied military withdrawal from Afghanistan and works
to tighten security ties amid concern about Chinese influence in
Mr. Blinken will meet Wednesday with Indian Prime Minister
Narendra Modi and Minister of External Affairs Subrahmanyam
Jaishankar, with a U.S. agenda that officials said includes
Covid-19 response, security, defense and cyber issues as well as
counterterrorism cooperation. An Indian official said trade,
investment, healthcare and innovation also would be subjects of
interest to New Delhi.
Tokyo Sets New Daily Record for Covid-19 Cases, With Olympics
TOKYO-Tokyo on Tuesday set a new daily record for Covid-19
cases, reporting 2,848 new infections on the fifth day of the
Summer Olympics, which are taking place in the Japanese
The number of new cases surpassed the previous daily record of
2,520 set in January. The latest tally included cases recorded
early this week after a four-day holiday weekend ended Sunday.
Russia Holds Military Drills Off Japan's Mainland During Tokyo
TOKYO-Russia's military doesn't stand down for the Olympics.
On Tuesday, Moscow was set to begin military exercises on an
island near Japan that it seized in 1945 and Tokyo still claims. A
day earlier, Russia's prime minister visited islands in the same
North Korea Reopens Communications Hotline With South Korea,
Breaking a Year of Silence
SEOUL-North Korea reopened direct communication lines with South
Korea, raising the prospect that the Kim Jong Un regime could be
ready for engagement after a protracted period of diplomatic
The cross-border phone line was activated at 10 a.m. Tuesday
local time, the two Koreas said in separate announcements.
Pyongyang had severed all communication with the Seoul government
since June 2020, after Kim Yo Jong, the dictator's sister,
condemned South Korean activists for sending antiregime leaflets
over the border.
FDA Asks Covid-19 Vaccine Makers to Expand Number of Children in
The Food and Drug Administration has raised the minimum number
of young children that should be in Covid-19 vaccine trials to
better detect any side effects, people familiar with the matter
A big reason for the change, one of the people said, was to look
for side effects like the rare heart condition known as myocarditis
that surfaced in small numbers of people who took one of the
messenger RNA vaccines after they were authorized.
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(END) Dow Jones Newswires
July 27, 2021 06:16 ET (10:16 GMT)
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