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US and European stocks wavered on Thursday after a fresh jolt of volatility in Hong Kong’s equities bourse and ahead of a key US central bank summit.
The S&P 500 and Nasdaq were trading almost flat at market open. In Europe, the region-wide Stoxx 600 and the UK’s FTSE 100 were down 0.2 per cent, France’s Cac 40 slipped 0.1 per cent and Germany’s Dax declined 0.4 per cent. Trading volumes were lighter than average with many industry participants on summer holiday.
Asian markets came under more pressure, with Hong Kong’s Hang Seng index trading down 1.1 per cent. Short-video platform Kuaishou, a Chinese group listed in Hong Kong, tumbled 9.2 per cent after weaker than expected second-quarter earnings.
The Hang Seng is down 6.7 per cent in the year to date, with its technology sub-index off by almost 25 per cent. Markets in Hong Kong and mainland China have recently sustained successive bouts of tumult triggered by Beijing’s crackdowns on the private sector.
Meanwhile, South Korea became the first major Asian economy to raise interest rates since the start of the pandemic. The move comes before a virtual meeting of central bankers sponsored by the Kansas City Federal Reserve. The summit will be headlined with a speech on Friday by Fed chair Jay Powell.
Investors will be looking for clues on when the Fed will begin removing its crisis-era stimulus measures as the economy and labour market have recovered markedly from the coronavirus shock.
“The fact remains we have monetary policy settings at emergency levels,” said Steven Bell, chief economist at BMO Global Asset Management. “The fire is nearly out, it’s not appropriate to keep easing monetary policy.”
Bell said indicators such as signs of increasing wage inflation would be important measures for the decision on when to start tapering the Fed’s $120bn-a-month asset purchase programme.
St Louis Fed president James Bullard said on Thursday that the Fed was “coalescing” around a plan to reduce the programme.
The yield on the 10-year US Treasury note rose as much as 0.02 percentage points on Thursday to 1.356 per cent, bringing this week’s rise close to 0.09 percentage points. Higher yields point to a fall in prices.
Industry participants have said trading conditions in the $22tn US government bond market have worsened recently, which is something that could exacerbate volatility around major economic events.
Elsewhere, commodities slipped, with global oil benchmark Brent crude down 0.8 per cent at $71.49 a barrel, while the US marker West Texas Intermediate declined 1 per cent to $67.36 a barrel. Gold was down 0.4 per cent at $1,784 per troy ounce.
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