S&P 500 Futures Turn Sharply Lower; Dollar Gains: Markets Wrap

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(Bloomberg) — U.S. stock futures dropped sharply with European stocks just after 7:30 a.m. in New York, leaving traders scrambling for reasons to explain the move.

The catalyst behind the decline was unclear, but traders speculated on military tensions between China and Taiwan, Singapore’s tougher lockdown and Ferrari NV’s decision to postpone financial targets. S&P 500 Index contracts fell about 0.5% in a matter of minutes and stayed lower.

Nasdaq 100 Index futures were hit harder, sustaining losses of about 0.8%. In Europe, stocks also dropped after spending most of the session in the green. Ferrari sank 5.5% in Italian trading, and technology shares led the decline among industries.

“A lot of good news is priced in and we probably do need to digest a little bit,” said Aaron Clark, portfolio manager at GW&K Investment Management.

The move sent a jolt through markets that had been relatively calm through the European trading day, with investors continuing to rotate out of pandemic winners like technology and into sectors poised to gain from economic reopening.

An announcement from Taiwan that a Chinese jet had been detected by the country’s air force sparked chatter across trading desks, though was largely dismissed as routine event. Chinese military aircraft have been frequently entering Taiwanese air space and the defense ministry reported more than 20 incidents last month.

Elsewhere in markets, trading was mixed. The dollar rose, while the pound and euro weakened. West Texas Intermediate futures gained as much as 2.1%, touching their highest since mid-March. Treasuries were little changed.

Digital token Ether extended its surge to set another record, approaching $3,500. The token affiliated with the Ethereum blockchain — a digital ledger popular for financial services and sales of so-called cryptocollectibles like online art — is up about 1,500% in the past year.

Here are some key events to watch this week:

U.S. factory orders and durable goods are due TuesdayChicago Fed President Charles Evans gives a virtual speech at an event hosted by Bard College on Wednesday. Cleveland Fed President Loretta Mester gives a virtual speech to the Boston Economic ClubBank of England rate decision ThursdayThe April U.S. employment report is released on Friday

Here are the main moves in markets:

Stocks

Futures on the S&P 500 Index declined 0.6% as of 8:32 a.m. New York time.The Stoxx Europe 600 Index dipped 0.7%.The MSCI Asia Pacific Index decreased 0.1%.The MSCI Emerging Market Index dipped 0.1%.

Currencies

The Bloomberg Dollar Spot Index gained 0.3%.The euro fell 0.3% to $1.2022.The British pound sank 0.5% to $1.3848.The onshore yuan was little changed at 6.475 per dollar.The Japanese yen weakened 0.1% to 109.16 per dollar.

Bonds

The yield on 10-year Treasuries declined less than one basis point to 1.59%.The yield on two-year Treasuries advanced one basis point to 0.16%.Germany’s 10-year yield dipped two basis points to -0.22%.Britain’s 10-year yield decreased three basis points to 0.815%.Japan’s 10-year yield was unchanged at 0.097%.

Commodities

West Texas Intermediate crude increased 1.2% to $65.24 a barrel.Brent crude gained 1.3% to $68.41 a barrel.Gold weakened 0.3% to $1,786.78 an ounce.

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