US stock futures hold close to record highs as investors watch Biden-Xi talks while Beijing’s mine warning hits crypto

US President Joe Biden and Chinese President Xi Jinping at a virtual meeting.
US President Joe Biden and Chinese President Xi Jinping to their virtual meeting.

  • US stock futures drifted as investors focused on talks between US President Joe Biden and Chinese Prime Minister Xi Jinping.
  • Equities have been rattling lately over concerns over inflation that have pushed up government bond yields.
  • The crypto market was hit after China warned state-owned companies about mining, with bitcoin slipping below $ 60,000.

US stock futures fell on Tuesday as investors assessed a key meeting between US President Joe Biden and Chinese leader Xi Jinping, while cryptocurrencies were hit by warnings from Beijing.

Futures on the S&P 500, Nasdaq 100 and Dow Jones fell around 0.1-0.2%, repeating the softer tone of the benchmark indices on Monday, but were still within sight of November’s record highs.

Biden and Xi reiterated their role in avoiding conflicts for hours of conversations on Monday.

“It seems to me that our responsibility as leaders of China and the United States is to ensure that our competition between our countries does not develop into conflict, whether intentional or unintentional,” Reuters quoted Biden as saying.

The world’s two largest economies disagree on a number of key issues, such as trade, China’s pressure on Taiwan and how the Covid-19 pandemic started.

“It’s now over, with the first White House press release, a rather bland reflection on topics covered at the meeting without suggesting any major announcements are likely,” Deutsche Bank strategist Jim Reid said.

“There have been no mentions of tariffs being discussed, but we’ll probably hear more details later, so keep your eyes open on the screens for that.”

“At first glance, it looks like it was a collaborative meeting, but probably not a little substance has come out of it. We’ll see,” he added.

The offshore yuan hit a five-month high against the dollar on Tuesday, reflecting growing investor confidence in the strength of US-China relations. Given this yuan strength, the Shanghai Composite closed 0.3% lower, while Hong Kong’s Hang Seng rose 1.3%.

The MSCI All-World Index traded flat at the end of the day, hitting record highs a week ago. In Europe, the Stoxx 600 rose 0.2% after reaching all-time highs earlier thanks to increases in telecommunications, banks and travel stocks.

UK blue chips were slightly touched by data showing a faster growth in the UK labor market, which could cause the Bank of England to raise interest rates faster than expected. The FTSE 100 was flat at the end of the day, while the pound rose broadly, rising 0.3% against both the dollar and the euro.

Another inflation-driven rise in government bond yields the previous day took wind out of the stock market’s sails. US 2-year government yields, the most sensitive to changes in investors’ expectations of inflation, have risen higher in the last three months. They are now at their highest since March last year, giving a return of 0.524%, unchanged on the day.

“The market was very surprised by the very strong inflationary pressure in the US last week,” said Bank of America strategist Athanasios Vamvakidis.

“We expect the Fed to change its communication to a more hawkish tone. In our view, the Fed will need to prepare markets for an earlier and faster tightening cycle.”

On Monday, Biden signed a massive $ 1,000 billion infrastructure law that brought new federal money to roads and bridges and a blow to the cryptocurrency market.

Furthermore, the Chinese government warned state-owned companies about cryptocurrency mining and said it was considering taking sanctions, according to a Bloomberg report.

Bitcoin had recently fallen 9.9% to around $ 59,425 – heading for its biggest one-day decline since early September, falling below the key $ 60,000 level for the first time in November, based on Coinmarketcap data. Losses increased across other cryptocurrencies, with ether falling 11% and cardano falling 12%.

“While the comments are not entirely new, negative crypto-related comments from Chinese authorities have historically led to sales in the crypto market,” said FXEmpire analyst Olumide Adesina.

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