Global stocks fall, bonds rise on Hong Kong unrest
Civil unrest in Hong Kong weighed on investor sentiment, causing Global markets to fall, while Treasury debt prices rose over uncertainty sparked by the protests.
On Wall Street, stocks opened much lower, following declines in Europe and Asia, as Hong Kong democracy protesters continued one of the biggest political challenges for China since Tiananmen Square.
HSBC closed down 2.3 percent and Richemont fell 1.7 percent, as both stocks are exposed to Hong Kong.
Initially, all 10 of the S&P 500′s sectors lowered as equity investors ignored data showing strong U.S. economic growth. Stocks and utilities then rebounded and came up off their lows.
“The sell-off was overdone and was exacerbated in the absence of any news of consequence to the market”, said Donald Selkin, chief market strategist at National Securities in New York.
“The problem is we’re not going to get any upside motivations here until the start of third-quarter earnings seasons next week,” said Selkin, adding that major investors would look toward Friday’s jobs report.
“When the CBOE Volatility Index .VIX rose above 17, or close to resistance points in April and early August, the market’s decline receded,” Selkin said.
The VIX was last up 7.1 percent at 15.90, and there were almost 1 percent losses on Wall Street.
The Dow Jones industrial average .DJI fell 68.39 points, or 0.4 percent, to 17,044.76. The S&P 500 .SPX slid 7.3 points, or 0.37 percent, to 1,975.55 and the Nasdaq Composite .IXIClost 9.35 points, or 0.21 percent, to 4,502.85.
MSCI’s all-country world index .MIWD00000PUS was down 0.5 percent, while the FTSEurofirst 300 index .FTEU3 of leading European shares closed down 0.43 percent at 1,371.11.
Benchmark 10-year U.S. Treasury notes US10YT=RR gained 15/32 in price to yield 2.4807 percent.
The demand for bonds grew because of the uncertainty in Hong Kong. Adding to demand was month-end buying, while some gains were seen as giving back weakness from Friday when Pimco was feared to have to sell assets after co-founder Bill Gross left.
Many thought Pimco would unwind large positions that bet on low volatility.
“The idea was that Pimco has sold a lot of vol and they may get out of some of those positions,” said Ira Jersey, an interest rate strategist at Credit Suisse in New York.
Contracts to purchase previously owned homes fell more than expected last month, but were still at the second-highest level of the year, while consumer spending spiked. Friday’s much-anticipated jobs report for September will show investors further signs on the economy.
Against the yen, the dollar lost early gains on nervousness the democracy protests in Hong Kong, a global financial hub, might hurt the local economy.
Japanese currency remains a safe option during political unrest.
U.S. crude oil, remaining around $94 a barrel, carried over strength from a strong report on U.S. gross domestic product last week, while Brent edged up after nearing a two-year low last week.
Brent for November delivery LCOc1 rose 8 cents to $97.08 a barrel. U.S. crude CLc1 rose 50 cents to $94.04 a barrel.