Asia Stocks to Drop After U.S. Slide; Bonds Rise: Markets Wrap

(Bloomberg) — Asian stocks looked set to end the week with declines after U.S. equities tumbled by the most in almost three months, with the rotation away from high-flying tech stocks gaining steam as investors questioned the sustainability of lofty valuations.

Futures in Japan, Hong Kong and Australia retreated, though signaling smaller losses than the 3.5% slide in the S&P 500 Index. The Nasdaq Composite sank 5%, its largest decline since June. U.S. stock futures opened lower ahead of the August jobs report. Treasury yields dipped and the dollar edged higher, with moves into haven assets muted despite the pronounced drop in equities.


a screenshot of a cell phone: Major U.S. equity benchmarks post worst rout since June

© Bloomberg Major U.S. equity benchmarks post worst rout since June

Global equities are pulling back from all-time highs just as the strong recent run up showed signs of broadening into other sectors. Investors are monitoring progress on a vaccine for the pandemic and continued signals of support from central banks and government to support the economy. While data Thursday showed applications for jobless claims fell last week, U.S. investors may need evidence of a fuller economic recovery after a 60% run-up in the S&P 500 since its March lows.

“What we’re seeing here just a little bit of a reckoning,” said Nancy Prial, co-chief executive officer at Essex Investment Management. “It’s too soon to say whether this is a pause that refreshes or whether this is the beginning of a more meaningful downturn in big tech. Most of these are great companies with really robust growth opportunities, but the stocks are very richly valued.”

Elsewhere, oil declined. The Cboe Volatility Index — a measure of expected price swings for the S&P 500 Index known as Wall Street’s “fear gauge” — rose to the highest level since June. Bitcoin fell as much as 7.6%.

Here are some key events coming up:

U.S. jobs report Friday is forecast to show payrolls continued to rebound in August from virus lows.

Here are the main market moves:

Stocks

S&P 500 futures slipped 0.3% as of 7:01 a.m. in Tokyo. The index sank 3.5% and the Nasdaq Composite lost 5% on Thursday.Futures on Japan’s Nikkei 225 declined 1.9%.Hang Seng futures retreated 1.3%.Futures on Australia’s S&P/ASX 200 Index fell 1.9%.

Currencies

The Bloomberg Dollar Spot Index climbed 0.1%.The euro bought $1.1851.The yen was at 106.17 per dollar.The offshore yuan traded at 6.8449 per dollar.

Bonds

The yield on 10-year Treasuries fell two basis points to 0.63%.

Commodities

West Texas Intermediate crude declined 0.4% to $41.21 a barrel.Gold was at $1,932.97 an ounce.

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