Chinese stocks earlier plunged on concerns that companies may pull more money out of China as economic growth slows, lowering earnings for U.S. and European companies dependent on revenue from China. Futures for the Dow Jones Industrial Average dropped 29.5 points to 17,474.5, while the Standard & Poor’s 500 index futures fell 3.60 points to 2,095.65.
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“Wal-Mart earnings will weigh on the Dow”, said Randy Frederick, managing director of trading and derivatives at Charles Schwab.
A report showed US housing starts rose 0.2 percent to a 1.21 million annualised rate in July, the highest level in almost eight years, and up from an upwardly revised 1.2 million in June.
“All the news out of China recently has done nothing to restore confidence in its financial markets”, said David Madden, market analyst at IG, “and the ripple effect can be felt in Europe“.
The People’s Bank of China set the Chinese currency’s midpoint rate at 6.3966 against the dollar, but the yuan fell against the greenback during Asia trading to about 6.40.
“Bottom line, the nice uptick in single family starts certainly follows the better home builder sentiment we saw from the NAHB as a dearth of inventories is hopefully going to now be met by improved supply”. It was the index’s largest one-day drop since an 8 percent dive on July 27 and happened even though Beijing banned major shareholders from selling stocks. Germany’s and France’s CAC 40 fell almost 0.2%. Worries over China, a key customer for German-made machinery, chemicals and other goods, have helped knock the DAX down 3.5 percent so far in August.
Asian stock markets were mostly lower on Tuesday as disappointing data from the U.S. and further drops in prices of oil and other commodities led investors to remain cautious about betting on risky assets. Japan’s Nikkei dipped 0.3%.
Precious and industrial metals settled broadly lower.
CRUDE: Benchmark U.S. crude fell 22 cents at $41.65 per barrel on the New York Mercantile Exchange.
BONDS & CURRENCIES: U.S. government bonds fell, nudging the yield on the 10-year Treasury note up to 2.19 percent, roughly its level at the end of last week.
Energy shares pared a steeper loss of as much as 0.9 percent after oil rebounded on speculation that a government report will show that U.S. crude inventories declined for a fourth week.
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In the Dow, slides in shares of Wal-Mart and those of Cisco, down 3.6 percent and 2.1 percent respectively, outweighed gains in shares of Home Depot and those of UnitedHealth, last up 2.4 percent and 1.5 percent respectively.
