Stocks fell with US equity futures Thursday and the dollar jumped as a lockdown in a Chinese metropolis and a hawkish drumbeat from central banks further frayed investor nerves.

A global equity index hit a six-week low, dragged down by a slide in Asian shares amid a retreat in tech firms. S&P 500 and Nasdaq 100 contracts slid partly on a tumble in chipmaker Nvidia Corp. over a sales warning. 

China moved to lock down Chengdu, a city of 21 million residents, from Thursday night to tackle Covid. It’s the biggest Chinese city to face such curbs since Shanghai’s bruising two-month crisis earlier this year.

The market jitters come after the worst month since June for US shares, reflecting fears of an economic downturn alongside restrictive monetary policy to choke inflation. A global bond selloff saw the two-year Treasury yield touch 3.50% for the first time since 2007.

Commodity-linked and Group-of-10 currencies weakened, while the yen fell to a fresh 24-year low — heading closer to the 140 per-dollar level.

Stocks are entering a month that is often poor for returns after an August of losses across asset classes. An equity bounce from June lows is fizzling as the Federal Reserve pushes back against bets on tempered rate hikes. Global bonds, meanwhile, are near their first bear market in a generation.

The market is getting the message that the Fed is going to fight inflation at all costs, Frances Stacy, director of strategy at Optimal Capital Advisors, said on Bloomberg Radio, adding “I don’t think we’ve seen the bottom for this year.”

No Cuts

Cleveland Fed President Loretta Mester reiterated the central bank needs to raise its benchmark rate above 4% by early next year. She said she doesn’t anticipate rate cuts in 2023.

Elsewhere, oil was on the back foot, sliding to about $89 a barrel. Aggressive Fed tightening and China’s slowdown are dimming the demand outlook. Bitcoin weakened, hovering around the closely watched $20,000 level.

The latest economic data underlined a parlous outlook for China. A private survey suggested factory activity contracted in August, sapped by power shortages and Covid-linked curbs.

Here are some key events to watch this week:

• ECB Governing Council members due to speak at event Tuesday through Sept. 2
• US nonfarm payrolls, Friday
• UK leadership ballot closes Friday. Winner announced Sept. 5

Will Chinese sovereign bonds outperform Treasuries? China is the theme of this week’s MLIV Pulse survey. Click here to participate anonymously.

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.6% as of 6:23 a.m. in London The S&P 500 fell 0.8%
• Nasdaq 100 futures fell 1%. The Nasdaq 100 fell 0.6%
• Japan’s Topix index slid 1.3%
• South Korea’s Kospi index dropped 1.8%
• Australia’s S&P/ASX 200 Index lost 1.6%
• Hong Kong’s Hang Seng Index slid 1.5%
• China’s Shanghai Composite Index was little changed
• Euro Stoxx 50 futures declined 0.9%

Currencies

• The Bloomberg Dollar Spot Index was up 0.3%
• The euro was at $1.0013, down 0.4%
• The Japanese yen was at 139.43 per dollar, down 0.3%
• The offshore yuan was at 6.9138 per dollar, down 0.1%

Bonds

• The yield on 10-year Treasuries was at 3.19%
• Australia’s 10-year yield increased nine basis points to 3.69%

Commodities

• West Texas Intermediate crude fell 0.5% to $89.11 a barrel
• Gold was at $1,704.78 an ounce, down 0.4%

SOURCE :- bloomberg