First Look With Surveillance: China Crackdown, German Elections
Stocks struggled for direction after China intensified its sweeping regulatory crackdown on cryptocurrencies. Bitcoin, Ether and other digital tokens tumbled.
In another blow to investor sentiment, the world’s second-largest economy said crypto-related transactions will now be considered illicit financial activity. Traders remained on guard for what Chinese regulators may target next as the government has also tightened its grip on sectors ranging from private education to digital gaming, e-cigarettes, property and insurance.
“China is dealing with a few fiscal systemic challenges right now,” said David Tawil, president of ProChain Capital. “My expectation is that this is ‘for real’ and that China will not reverse course on this position anytime soon, if ever. Nevertheless, if this move was inevitable, better that it happens sooner, so that the investment community can digest and move on.”
Tech shares in the S&P 500 fell, while financial companies outperformed. The dollar climbed. Bitcoin slid about 6 per cent, while Ether plunged almost 13 per cent earlier Friday. Crypto-related stocks like Riot Blockchain Inc. and Marathon Digital Holdings Inc. also tumbled. The Nasdaq Golden Dragon China Index -- which tracks some of the Asian nation’s biggest firms listed in the U.S. -- sank as much as 3.6 per cent.
Volatility in U.S. stocks and major developed currencies is swinging in lockstep by the most in more than a year, as risks from Beijing compete with central banks to drive market moves. China’s housing regulator boosted oversight of China Evergrande Group’s bank accounts to protect funds earmarked for housing projects from being diverted to creditors.
Traders pulled US$28.6 billion from U.S. equity funds in the week through Sept. 22 -- the largest redemption since February 2018, according to a Bank of America Corp. note, which cited EPFR Global data.
The U.S. economy has met the Federal Reserve’s conditions for starting to reduce its asset purchases soon, according to two regional Fed bank presidents.
“I support starting to dial back our purchases in November and concluding them over the first half of next year,” Fed Bank of Cleveland President Loretta Mester noted. Separately, her Kansas City counterpart Esther George said “the criteria for substantial further progress have been met,” referring to the central bank’s taper test.
Some of the main moves in markets:
- The S&P 500 was little changed as of 1:07 p.m. New York time
- The Nasdaq 100 fell 0.1 per cent
- The Dow Jones Industrial Average was little changed
- The MSCI World index fell 0.2 per cent
- The Bloomberg Dollar Spot Index rose 0.2 per cent
- The euro fell 0.2 per cent to US$1.1716
- The British pound fell 0.3 per cent to US$1.3676
- The Japanese yen fell 0.4 per cent to 110.76 per dollar
- The yield on 10-year Treasuries advanced two basis points to 1.45 per cent
- Germany’s 10-year yield advanced three basis points to -0.23 per cent
- Britain’s 10-year yield advanced two basis points to 0.92 per cent
- West Texas Intermediate crude rose 1.3 per cent to US$74.27 a barrel
- Gold futures were little changed