Stock futures slide as China COVID restrictions spark fresh global growth fears

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U.S. stock futures stumbled on Monday as China COVID fears sparked fresh global growth concerns

How are stock-index futures trading
  • S&P 500 futures
    ES00
    dipped 0.6%, or 24 points, to 3878

  • Dow Jones Industrial Average futures
    YM00
    fell 0.5%, or 166 points, to 31141

  • Nasdaq 100 futures
    NQ00
    eased 0.7%, or 93 points, to 12065

On Friday, the Dow Jones Industrial Average
DJIA
fell 46 points, or 0.15%, to 31338, the S&P 500
SPX
declined 3 points, or 0.08%, to 3899, while the Nasdaq Composite
COMP
gained 14 points, or 0.12%, to 11635.

What’s driving markets

Investors started the week in a downbeat mood as a fresh flare up of China COVID-19 concerns added to the angst about prospects for the global economy.

Beijing imposed at the weekend stringent restrictions across a number of cities to tackle the emergence of the highly contagious BA.5 Omicron sub-variant. China makes up more than a quarter of global manufacturing and any shutdown can hobble the worldwide supply chain, potentially causing further price spikes. The Shanghai Composite
CN:SHCOMP
dropped 1.3%.

The fall in U.S. equity index futures came after a 3% rebound for the S%P 500 last week when traders reasoned that the market’s recent drop to an 18-month low meant fears about inflation and slowing growth were factored in. A better than expected U.S. labor report, which showed a net 372,000 jobs added in June, also supported sentiment.

The U.S. second quarter earnings season kicks into gear on Thursday — with JPMorgan
JPM
leading the way for the banking sector — and investors will now be keen to see just how much rising prices have impacted corporate profitability.
“This is a very important season (aren’t they all) as the collapse in equities so far in 2022 is largely due to margin compression and not really earnings weakness,” said analysts at Deutsche Bank.

Stephen Innes, managing partner at SPI Asset Management, said that the market will be focused on company guidance for coming quarters, and the post-earnings reactions will dictate the broader market risk appetite.

“While bears still see 10-15% more S&P 500 downside, increasing sympathy for a bull case is emerging (or at least a bear squeeze). We are already amid a shallow slowdown, which may be the best-case scenario for risk,” he said.

Twitter
TWTR
shares lost 7% in premarket action after Elon Musk said he was withdrawing his bid. The company said it will try to enforce the $44 billion buyout.

Other markets
  • The Hang Seng
    HK:HSI
    in Hong Kong slumped 2.9% after China imposed big fines on Tencent
    HK:700
    and Alibaba
    HK:9988
    for not complying with disclosure rules. Japan’s Nikkei 225
    JP:NIK
    bucked the regional trend, adding 1.1% after the country’s rulling coaltion expanded its majority in upper house elections.

  • Waning risk appetite helped push investors into Treasuries, nudging 10-year bond yields
    BX:TMUBMUSD10Y
    down 4 basis points to 3.060%, and also boosted the dollar. The DXY
    DXY
    index rose 0.5% to 107.53 to flirt with 19-year highs.

  • WTI crude
    CL
    fell 2.8% to $101.85 a barrel as economic slowdown worries reverberated.

  • Gold
    GC00
    dipped 0.4% to $1736 an ounce and Bitcoin
    BTCUSD
    slid 3.7% to $20484.

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