Stocks retreat as Fed kicks off policy meeting

US and European stock markets fell on Tuesday after a mixed Asian session, as attention turned to the Federal Reserve and the start of the US central bank’s policy meeting.

Bitcoin, which briefly topped $40,000 on Monday, dropped under $38,000 after Amazon denied a report that it planned to begin accepting the digital currency by the end of the year.

Hong Kong led a sell-off across most Asian stock markets, extending the previous day’s losses as traders were spooked by China’s latest crackdown on a range of industries.

New regulations on China’s tutorial sector — which has clobbered private education firms — along with more moves against tech firms and fresh rules for property and food delivery companies has traders wondering where Beijing will strike next, analysts said.

In the background are rising concerns about the fast-spreading Delta coronavirus variant and the slow rollout of vaccines, with some governments having to impose new lockdowns or other containment measures.

Meanwhile, the highest-level China-US talks under President Joe Biden ended without making much headway, suggesting tensions between the two superpowers will continue to simmer.

Hong Kong sank more than four percent to match Monday’s drop with investors running for cover after Beijing’s latest move to tighten control over the economy.

At the weekend, China said it would prevent after-school tutoring companies from making a profit, raising capital or going public, making it virtually impossible to invest in them.

Officials also looked to wind in tech giant Tencent, while unveiling new rules to protect hard-pressed drivers in the delivery business.

“China’s regulatory uncertainty is not going away,” said Rodrigo Catril at National Australia Bank.

“Indeed it looks to be broadening, with no clarity as to when and where it will end.”

In Hong Kong, the value of shares in firms caught in the regulatory sweep fell further, though losses for education firms were not as stark as on Monday.

Tencent was also hit after it was told to relinquish exclusive music label rights owing to apparent antitrust breaches.

It’s shares fell by 10 percent, while Alibaba shed more than six percent. Food delivery firm Meituan lost more than 17 percent.

– Fed meeting in focus –

The downbeat mood on Tuesday was in stark contrast to Monday on Wall Street, where all three main indices finished again at record highs thanks to healthy corporate earnings and a firm belief that the long-term economic outlook remains strong.

Eyes are now on the Federal Reserve’s key board meeting for some forward guidance on policy in light of the economic recovery and concerns about surging prices.

While the central bank is expected to maintain its accommodative stance for now, it is thought officials will begin discussing how to ease its bond-buying programme.

Earnings reports from market titans such as Amazon, Apple and Microsoft are also due this week, and observers felt it was likely that firms could continue to enjoy growth for another 18 months as the post Covid process continues.

Market analyst Patrick J. O’Hare at Briefing.com said companies are expected to turn in results that surpass the expectations of analysts.

“The question is, can they surpass the high expectations, not only with their results but with their guidance/demand outlook?” he said.

– Key figures around 1330 GMT –

London – FTSE 100: DOWN 0.4 percent at 7,000.29 points

Frankfurt – DAX 30: DOWN 0.5 percent at 15,538.62

Paris – CAC 40: DOWN 0.4 percent at 6,549.85

EURO STOXX 50: DOWN 0.6 percent at 4,076.94

New York – Dow: DOWN 0.6 percent at 34,947.69

Tokyo – Nikkei 225: UP 0.5 percent at 27,970.22 (close)

Hong Kong – Hang Seng Index: DOWN 4.2 percent at 25,086.43 (close)

Shanghai – Composite: DOWN 2.5 percent at 3,381.18 (close)

Euro/dollar: UP at $1.1822 from $1.1802 at 2125 GMT

Euro/pound: UP at 85.53 pence from 85.41 pence

Pound/dollar: UP at $1.3823 from $1.3815

Dollar/yen: DOWN at 109.89 yen from 110.37 yen

Brent North Sea crude: UP 0.3 percent at $74.70 per barrel

West Texas Intermediate: UP 0.2 percent at $72.03 per barrel

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