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Wall Street stocks followed European and Asian bourses lower on Friday as jitters about slowing global growth and a Chinese regulatory crackdown on large tech businesses weighed on sentiment.
The blue-chip S&P 500 share index dropped 0.6 per cent in early dealings, although it remained on course for its sixth consecutive month of gains generated by strong corporate earnings and record-low interest rates.
The technology-focused Nasdaq Composite fell 0.9 per cent, pulled down by moves by Beijing to curb overseas data sharing by businesses in its burgeoning tech sector and ecommerce group Amazon’s quarterly results missing analysts’ forecasts.
The Stoxx Europe 600 index, which hit an all-time high in the previous session, dipped 0.3 per cent.
Companies on the Stoxx have reported earnings per share growth of 159 per cent for the second quarter from the same time last year, according to Citigroup. Those on the S&P 500 have increased profits by 97 per cent.
“This is likely the top,” said Arun Sai, senior multi-asset strategist at Pictet, referring to the pace of earnings increases after economic activity rebounded from historic contractions in the US and Europe last year. Financial markets, he said “have formed a narrative of peak economic growth and peak momentum”.
Data released on Thursday showed the US economy grew at a weaker than expected annualised rate of 6.5 per cent in the three months to June, as labour shortages and supply chain disruptions caused by coronavirus persisted.
In China, the regulatory assault on large tech businesses has sparked fears of a broader crackdown on companies in which the state does not own large stakes, which could slow the nation’s decelerating economy further.
“It underlines the leadership’s ambivalence towards markets,” said Julian Evans-Pritchard of Capital Economics. “We think this will take a toll on economic growth over the medium term.”
Hong Kong’s Hang Seng index closed 1.4 per cent down on Friday, while mainland China’s CSI 300 dropped 0.8 per cent, after moderating their precipitous slides from earlier in the week.
Japan’s Topix closed 1.4 per cent lower, after the daily tally of Covid cases in Tokyo surpassed 3,000 for three consecutive days. South Korea’s Kospi 200 dropped 1.3 per cent.
The yield on the 10-year US Treasury bond, which moves inversely to its price, fell 0.03 percentage points to 1.242 per cent as investors sought shelter in the haven asset. Germany’s equivalent Bund yield was steady at minus 0.453 per cent, its lowest since early February.
The dollar index, which measures the greenback against major currencies, added 0.1 per cent despite widespread expectations of the US central bank maintaining interest rates at ultra-low levels.
The Federal Reserve, which has bought about $120bn of bonds monthly throughout the pandemic to pin down borrowing costs for households and businesses, said this week that the economy was making “progress” but it remained too early to tighten monetary policy.
“Tapering [of the bond purchases] could be delayed, which in many ways is not bad news for the market,” said Anthony Collard, head of investments for the UK and Ireland at JPMorgan Private Bank.
Brent crude, the global oil benchmark, rose 0.4 per cent to $76.34 a barrel.
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