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Asia stocks hit seven-month low as China skids, funds favour Wall Street

Stock MarketsJul 25, 2021 11:36PM ET
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© Reuters. FILE PHOTO: An investor looks at an electronic board showing stock information at a brokerage house in Beijing, August 27, 2015. REUTERS/Jason Lee/File Photo

By Wayne Cole

SYDNEY (Reuters) - Asian shares skidded to seven-month lows on Monday as regulation concerns upended Chinese equities and strong U.S. corporate earnings sucked funds out of emerging markets into Wall Street.

Chinese blue chips shed 2.4% to their lowest in 10 weeks as the education and property sectors were routed on worries over tighter government rules.

That dragged MSCI's broadest index of Asia-Pacific shares outside Japan down 1.4% to its lowest since early January. Japan's Nikkei did bounce 1.4%, but that was off a seven-month low.

In contrast, Nasdaq futures were steady near historic highs, though S&P 500 futures eased 0.3%. EUROSTOXX 50 futures and FTSE futures both dipped 0.5%.

More than one-third of S&P 500 companies are set to report quarterly results this week, headlined by Facebook Inc (NASDAQ:FB), Tesla (NASDAQ:TSLA) Inc, Apple Inc (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL) Inc, Microsoft Corp (NASDAQ:MSFT) and Amazon.com (NASDAQ:AMZN).

With just over one-fifth of the S&P 500 having reported, 88% of firms have beaten the consensus of analysts' expectations. That is a major reason global money managers have poured more than $900 billion into U.S. funds in the first half of 2021.

Oliver Jones, a senior markets economist at Capital Economics, noted U.S. earnings were projected to be roughly 50% higher in 2023 than they were in the year immediately prior to the pandemic, significantly more than was anticipated in most other major economies.

"With so much optimism baked in, it seems likely to us that the tailwind of rising earnings forecasts, which provided so much support to the stock market over the past year, will fade," he cautioned.

The week is also packed with U.S. data that should underline the economy's outperformance. Second-quarter gross domestic product is forecast to show annualised growth of 8.6%, while the Fed's favoured measure of core inflation is seen rising an annual 3.7% in June.

The Federal Reserve meets on Tuesday and Wednesday and, while no change in policy is expected, Chair Jerome Powell will likely be pressed to clarify what "substantial further progress" on employment would look like.

"The main message from Fed Chair Powell’s post-meeting press conference should be consistent with his testimony before Congress in mid-July when he signalled no rush for tapering," said NatWest Markets economist Kevin Cummins (NYSE:CMI).

"However, he will clearly remind market participants that the taper countdown has officially begun."

So far, the bond market has been remarkably untroubled by the prospect of eventual tapering with yields on U.S. 10-year notes having fallen for four weeks in a row to stand at 1.26%.

The drop has done little to undermine the dollar, in part because European yields have fallen even further amid expectations of continued massive bond buying by the European Central Bank.

The single currency has been trending lower since June and touched a four-month trough of $1.1750 last week. It was last at $1.1775 and looked at risk of testing its 2021 low of $1.1702.

The dollar has also been edging up on the yen to reach 110.40, but remains short of its recent peak at 111.62. The fall in the euro has lifted the dollar index to 92.870, a long way from its May trough of 89.533.

The rise in the dollar has offset the drop in bond yields to leave gold range-bound around $1,800 an ounce.

Oil prices have generally fared better amid wagers that demand will remain strong as the global economy gradually opens and supply stays tight. [O/R]

Brent was trading down 22 cents at $73.88 a barrel, while U.S. crude fell 28 cents to $71.79.

Asia stocks hit seven-month low as China skids, funds favour Wall Street
 

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Comments (13)
Ali Almutairi
Ali Almutairi Jul 26, 2021 4:59AM ET
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In my opinion this is the biggest sign of the USA&China war
Javal Swift
Javal Swift Jul 26, 2021 3:26AM ET
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China is actually being smart and letting their marker deflate and not printing money to the moon like the US is doing. Eventually it will be US stocks crashing and China stocks surging, as long as US government does not intervene and delist China stocks. The US may stop its own citizens from seeking shelter and prosperity in China securities in order to keep them trapped in the bubble. Just a thought
Pablo Blanc
Pablo Blanc Jul 26, 2021 1:33AM ET
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So now everyone in china buying crypto even though crypto banned
robert Flippa
robert Flippa Jul 26, 2021 1:32AM ET
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market correction to pre trump levels is imminent, everyone knows it...mm's just want to squeeze every drop before shorting.....rinse and repeat
Gi Mi
Gi Mi Jul 26, 2021 1:22AM ET
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After the ChinaCovid in 2020 they will try to push the EU/US stock markets down again to take over and conquer the world. Welcome to the new kind of WW..
Lazo Syxt
Lazo Syxt Jul 26, 2021 1:22AM ET
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How can they conquer the world, when stock market is down?
Gi Mi
Gi Mi Jul 26, 2021 1:22AM ET
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Lazo Syxt when your central bank buy everything on the other stock markets
Kaveh Sun
Kaveh Sun Jul 26, 2021 12:40AM ET
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China just k/i/ lled the for profit education corps. They also put their big tech under tight gov control. Invest in China is gambling since they dont have any clear law. Even if they have one, they can change in a snap.
Thuan Bui
Thuan Bui Jul 26, 2021 12:40AM ET
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Law is quite clear, China won't allow monopolies and private sector overcharging for basics such as education. Unlike US... making the rich richer and making their stock markets a complete Ponzi scheme for the rich
Thuan Bui
Thuan Bui Jul 26, 2021 12:40AM ET
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tester test let's earnings decide company value not endless money printing and members of Congress buying options/stocks whilst saying they understand the poor/needy and low-income
Jack AAA
Jack_A Jul 26, 2021 12:25AM ET
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"strong U.S. corporate earnings sucked funds out of emerging markets into Wall Street". sink to bubble? more inflation? LoL
Mike Chen
Mike Chen Jul 26, 2021 12:09AM ET
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Will China lead the world market collapse? More worlfwide collapses coming soon!
Sarc pvt limited
Sarc pvt limited Jul 25, 2021 11:44PM ET
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fii on selling spree ..downfall expected
Sergio Jacob
Sergio Jacob Jul 25, 2021 11:19PM ET
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Bear market
 
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