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2_12 Stock futures trade lower on China Covid concerns after a winning holiday week

Stock futures trade lower on China Covid concerns after a winning holiday week

After a successful and lucrative run in the stock market before the festive season, the market’s mood seems sour as they learn that China might impose fresh new lockdowns nationwide as they still try to combat the Covid-19 threat.

On a global level, the economic outlook of the stock market was looking quite optimistic and was on the way to recovery.

On Monday, the city’s most populous district asked citizens to stay at home as the number of COVID cases increased, and at least one district in Guangzhou was shut down for five days, stated Thomas Hayes, president of New York’s Great Hill Capital.

The Chinese government is taking some significant action, so there will be fits and starts in the near future, even though it seemed like zero COVID was headed in the right path, and everyone was happy about it.

While European stocks (.STOXX) remained stable, MSCI’s largest index of global equities (.MIWD00000PUS) decreased by 0.72%.

All three major Wall Street indexes were trading lower, driven by a selloff in stocks related to technology, energy, communication services, and consumer discretionary.

The Nasdaq Composite (.IXIC) sank 1.09% to 11,024.51, the S&P 500 (.SPX) dropped 0.39% to 3,949.94, and the Dow Jones Industrial Average (.DJI) declined 0.13% to 33,700.28.
Following a report that Saudi Arabia was in talks with OPEC allies to increase supply, oil prices plunged to their lowest point since early January. Still, they recovered some of those losses as the country refuted the claim. Concerns over declining Chinese fuel demand also hurt crude.

Before the contract’s expiration later on Monday, U.S. West Texas Intermediate (WTI) crude futures for December settled at $79.73 a barrel, down 35 cents from their December settlement prices of $87.45 and $87.45, respectively.

According to Cliff Hodge, chief investment officer at Cornerstone Wealth in Charlotte, North Carolina, “with oil, there’s always the supply and demand picture, and right now, the market is hoping for some insight on the demand side.”

In particular, this year, Hodge said, “oil demand will typically decline when the world economy slows or enters a recession, which we believe will be slightly worsened by China.”

The U.S. dollar strengthened versus the majority of other major currencies, recovering recent losses as traders avoided riskier currencies due to worries about the global economy’s future due to China’s COVID controls. With the euro falling to $1.0239, the dollar index increased by 0.851%.

Concern for additional Federal Reserve interest rate hikes caused U.S. Treasury rates across most maturities to nudge higher at the beginning of a week cut short by Thanksgiving. On worries that the central bank’s tightening may hinder economic development, the yield curve remained sharply inverted.

Benchmark 10-year note yields increased to 3.8419% from earlier lows, while the yield on 2-year notes increased to 4.5651%. However, 30-year bonds with a long maturity still had lower rates, at 3.9066%.

The dollar extended gains, and gold prices fell to their lowest levels in almost a week as the market focused on the upcoming release of the U.S. Federal Reserve’s November meeting minutes.

In contrast to U.S. gold futures, which lost 0.90% to $1,737.40 per ounce, spot gold slid 0.7% to $1,738.41 per ounce.