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Tech Sell-Off, Chinese PPI, Crypto's Colonial Jitters - What's Moving Markets

EconomyMay 11, 2021 06:26AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- The sell-off in technology stocks is set to continue, after weakness in Asia and Europe overnight. Equities are broadly weaker after signs of inflation emerging in China - but a bevy of Federal Reserve speakers has the opportunity to calm nerves ahead of tomorrow's CPI release in the U.S. Crypto assets have also sold off as the Colonial Pipeline cyberattack illustrates the central place of cryptocurrencies in a global ransomware business approaching systemic proportions. And OPEC and the American Petroleum Institute release regular updates on oil supplies. Here's what you need to know in financial markets on Tuesday, May 11th.

1. Tech sell-off set to continue

The sell-off in technology stocks looks set to continue when Wall Street opens later, with Nasdaq 100 futures already down by more than 1% in the premarket session.  

Other U.S. indices were outperforming but were also marked lower: Dow Jones futures were down 0.4% while S&P 500 futures were down 0.7%.

The rise in commodity prices and nascent fears of monetary tightening appear to have been the catalyst for the move that started on Monday, but a variety of other factors have also been at work, from rising regulatory risk to the awareness of sky-high valuations and the consequent rotation into value stocks.

China’s tech stocks held up reasonably well overnight, but the South Korean KOSPI fell 1.2%, with chipmakers prominent among the losers. Taiwan Semiconductor Manufacturing (NYSE:TSM) also fell 3.1% in Taiwan, while in Europe, chipmakers also led the STOXX Technology index to a 2.2% drop.  

2. China’s mixed inflation picture

Those looking for signs of inflation saw fresh evidence of it in China’s latest producer price data, which rose at the fastest annual rate in three and a half years in April. The PPI rose to 6.8% from 4.4% in March, driven largely by expectations of orders for domestic infrastructure investment.

China’s consumer inflation rate, however, rose by less than expected to 0.9%, despite signs that the global chip shortage is feeding through into higher prices for appliances. (Separately, Japan's Nissan warned overnight that it would struggle to turn a profit this year due to the chip issue).

Separately, China’s census data showed its population grew at the slowest rate in over 100 years in the decade through 2020.  The shrinkage of China’s working age population, and the growing number of pensioners it will have to support, may put significant upward pressure on wages in the long term, all other things being equal.

3. Crypto joins the sell-off; Musk tries to rally Doge fans

Crypto assets joined the sell-off, as the Colonial Pipeline ransomware attack revived fears that regulators may clamp down on the use of such currencies.

The hacker group DarkSide’s demand for payment in Bitcoin drew fresh attention to how the anonymity and untraceability offered by cryptocurrencies facilitate global crime.

By 6:30 AM ET, Bitcoin was down 4.7% at $55,625, while Ethereum was down 3.5% at $3,962. Dogecoin, however, put in a dead-cat bounce of 1.8% after Elon Musk attempted to undo the damage done by his Saturday Night Live appearance by canvassing Twitter on whether Tesla (NASDAQ:TSLA) should accept it.

Tesla has more pressing issues to worry about: Cathie Wood’s ARK Innovation Fund, one of its biggest backers, fell below its 200-day moving average on Monday, a move that may trigger more redemptions and forced selling of Tesla stock.  

4. JOLTS and Fed speakers

Four days after an alarmingly weak employment report, the Labor Department releases its JOLTS job openings survey for March at 10 AM ET (1400 GMT). Vacancies are set to rise to 7.50 million, closing in on the record high that they set in 2019..

The numbers will cast fresh light on the extent to which the shortfall in hiring in April was due to a mismatch of skills and openings in the labor force as business regains its freedom to operate. Economists argue that labor shortages could both hold back the pace of recovery and put upward pressure on wages faster than otherwise would be the case.

The rest of the day will be punctuated by speeches from Federal Reserve officials, who have the opportunity to talk down the rise in inflation in April that is expected to be announced on Wednesday. New York Fed President John Williams gets the ball rolling at 10:30 AM ET, with Lael Brainard, Raphael Bostic, Mary Daly and Patrick Harker all chipping in later.

5. Colonial sees pipeline largely back online by weekend  

Colonial Pipeline Company said it expects flows through its fuel pipelines to the East Coast to be substantially restored by the weekend, ensuring that the dislocation to the oil market from last week’s cyberattack on it remains relatively limited.

President Joe Biden said it’s likely Russia bears ‘some responsibility’ for the attack, given evidence suggesting that the hacker group DarkSide is based in eastern Europe. However, no evidence linking them to the Russian government has been presented, which limits the likelihood of retaliation that could hurt Russian financial markets.

The oil market can thus return to its more normal routine, which involves the publication of OPEC’s monthly report and the American Petroleum Institute’s weekly inventories estimates.

Tech Sell-Off, Chinese PPI, Crypto's Colonial Jitters - What's Moving Markets
 

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Comments (6)
MOBAPATSI FORTUNE
MOBAPATSI FORTUNE May 11, 2021 12:24PM ET
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Accurate article
me ish
me ish May 11, 2021 12:24PM ET
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not really - crypto wallets - especially those for BTC can be totally blocked and are not much use for ransoms - many wallets have been blocked with millions of usd worth of BTC frozen. BTC is useless for ransoms.
neang aee 냥에
neang aee 냥에 May 11, 2021 10:06AM ET
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It's time to say your farewell to comrades
Jack Zydron
Jack Zydron May 11, 2021 8:30AM ET
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bull, market manipulation. countries are reopening and it is going back to normal. tech companies are becoming very important especially in cyber security like Blackberry etc.
Investing Man
Investing Man May 11, 2021 8:30AM ET
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Ot course. But you cant take profit without making people think it has to do with anything else but your greed.
Abhishek Bal
Abhishek Bal May 11, 2021 6:46AM ET
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Add to this, the inflation is looming large with more than 60 % of global workforce reeling under the pressure of impending lockdown (India) or complete paralysis of the eco system while on the other the vaccine program is nowhere near the datum level. The tech. super valuation will now give way to value companies and the cyclical ones (metals and energy). Reshuffling is imminent. But as usual the retailers will be the last to know.
king michael
king michael May 11, 2021 6:31AM ET
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With $22 trillion GDP and over $27 trillion of national debt which also grows about $4 trillion a year. FED has run out of gas and has been talking to rollback the printing $ policy. The government has been keep tight the policy preventing US tech companies to sell very high profit margin products to other countries. All those are pushing this country to bankruptcy soon. Market will drop to near zero and an bankruptcy wave is on the way in tech sectors.
Ahan Vashi
Ahan Vashi May 11, 2021 6:31AM ET
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lol
Jenn foster
Jenn foster May 11, 2021 6:30AM ET
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so sick of this tech/growth sell off. i have no interest in the boring old school value stocks
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Larry DeAngelis
Larry DeAngelis May 11, 2021 6:30AM ET
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This is nothing! Markets can go down for several years!
yan yan
yan yan May 11, 2021 6:30AM ET
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for what its worth for the past week large fund flows were going into QQQ and out of DIA SPY
Adam Paine
Adam Paine May 11, 2021 6:30AM ET
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are there even any value stocks left? the whole market is overbought
me ish
me ish May 11, 2021 6:30AM ET
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Larry DeAngelis  and when accounting for inflation, you may not make any money on holding stocks for ten years plus.
me ish
me ish May 11, 2021 6:30AM ET
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Adam Paine  yes, but look to far east and africa and russia - some bargains to be had with the valuation is less than the net cash holdings of the company, let alone their other assets and the fact that they make profits and free cash flow too - they're out there, but you've got to look for them in the most boring sectors - but there are absolute bargain to be had.
 
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