Stock futures slip amid China’s economic risk and Delta variant outbreak 

Stock futures slip amid China’s economic risk and Delta variant outbreak

U.S. equity futures slipped Monday as the delta virus could stall a worldwide economic recovery and as investors await key Chinese data that may signal slower growth.

Futures fell in Japan and Australia but inched higher in Hong Kong, while U.S. contracts dipped. Futures linked to the Dow Jones Industrial Average fell 50 points. Those tied to the S&P 500 dipped 0.1% and Nasdaq 100 futures lost less than 0.1%.

S&P 500 and Nasdaq 100 contracts retreated. U.S. stocks eked out another record Friday but a drop in consumer sentiment to a near-decade low injected some caution, pushing down Treasury yields and the dollar, which held those losses in Asian trading.

The Dow ended last week at 35,515.38, a record close, while the S&P 500 finished Friday at 4,468.00 to notch its own best-ever finish.

The blue-chip Dow and the S&P 500 rounded out the week with muted gains of 0.8% and 0.7%, respectively, amid light summertime trading volumes. The tech-heavy Nasdaq Composite underperformed this week, down just under 0.1%.

The yield on the benchmark 10-year Treasury note was last seen at 1.283%. Bond yields fall as their prices rise.

Upcoming economic data includes an update on retail sales on Tuesday, as well as housing starts and the release of the Federal Reserve’s latest meeting minutes on Wednesday.

China retail sales and industrial output numbers may show growth slowed in July amid flooding and mobility curbs to fight a virus outbreak. Beijing’s regulatory crackdown on private industries has already unnerved markets, and speculation is growing that officials could further ease monetary policy.

Economists have cut their China GDP forecasts given the latest wave of travel restrictions and residential community lockdowns in the wake of the spread in the last two months of the highly contagious Delta variant within the country.

Besides, investors will be monitoring the Federal Open Market Committee’s latest minutes this week and a speech by Federal Reserve Chair Jerome Powell for more clues about the likely timeline for a tapering in the central bank’s US$120 billion in monthly bond purchases.

Damon Harrison
Market Analyst, IPG Group