NEW YORK, Aug 13 (Reuters) – Global stock markets hit new record highs on Friday, boosted by forecast-beating corporate earnings, but the dollar and Treasury yields fell after data showed U.S. consumer confidence plummeted in early August.

The University of Michigan’s survey showed consumer confidence falling to its lowest level since 2011 in the first half of this month. The decline marked one of the six largest drops in the past 50 years of the survey. read more

The unexpectedly weak reading could give Federal Reserve policymakers reason to pause on a decision over whether to begin pulling back the extraordinary stimulus it put in place to shield the U.S. economy from the COVID-19 pandemic.

“The renewed plunge suggests the latest wave of virus cases driven by the Delta variant could be a bigger drag on the economy than we had thought,” said Andrew Hunter, an economist at Capital Economics.

Pandemic-era stimulus has been behind much of the surge in stock prices the past year, but massive corporate earnings have given the rally new legs in recent weeks.

“If we look at the earnings trajectory, it still lends a lot of support to the valuations in the market,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management. “Earnings season provided some comfort and stability.”

The MSCI world equity index (.MIWD00000PUS), which tracks shares in 50 countries, hit a fresh record high. MSCI’s gauge of stocks across the globe (.MIWD00000PUS) gained 0.22%.

The S&P 500 (.SPX) and Dow Jones Industrial Average (.DJI) closed at record highs. Walt Disney (DIS.N) was a star performer, climbing 1.6% after its earnings topped market forecasts. read more

The Dow Jones Industrial Average (.DJI) rose 16.06 points, or 0.05%, to 35,515.91, the S&P 500 (.SPX) gained 7.26 points, or 0.16%, to 4,468.09 and the Nasdaq Composite (.IXIC) added 6.64 points, or 0.04%, to 14,822.90.

European stocks scaled new highs and clocked their fourth consecutive week of gains on optimism over a strong earnings season and steady recovery from the pandemic-led economic downturn.

The pan-European STOXX 600 index (.STOXX) rose 0.2% to a record high of 476.16, for the tenth straight session. The index has now matched its best winning streak since December 2006.

Not everyone is convinced the rally can continue, however.

“We feel a bit more cautious headed into autumn because of uncertainty on the health front, the Chinese regulatory front and the monetary policy front,” said Paul O’Connor, head of multi-asset at Janus Henderson.

Gold rose as tapering concerns eased. Spot gold added 1.5% to $1,778.31 an ounce. U.S. gold futures settled up 1.5% at $1,778.20.

U.S. benchmark 10-year Treasury yields tumbled and the dollar weakened after the consumer confidence survey, bolstering gold’s appeal.

Benchmark 10-year notes last rose 24/32 in price to yield 1.2884%, from 1.367% late on Thursday. The dollar index fell 0.516%, with the euro up 0.59% to $1.1796.

Worries about a regulatory crackdown in China and a surge in the COVID-19 Delta variant have sapped confidence in Asia, where markets mostly declined.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.56%, and was 0.8% lower for the week. Chinese blue chips (.CSI300) weakened 0.55%, dragged down by the local semiconductor sub-index (.CSIH30184), which slumped 4.1%.

Oil fell on Friday, but was on track to post a slight weekly gain, broadly shrugging off a warning from the International Energy Agency that the spread of coronavirus variants is slowing oil demand. U.S. crude futures settled at $68.44 per barrel, down 65 cents or 0.94%. Brent crude futures settled at $70.59 per barrel, down 72 cents or 1%.

Reporting by Matt Scuffham in New York Additional reporting by Evan Sully and Lindsay Dunsmuir; Editing by David Evans and Matthew Lewis

U.S. inflation pressures topping out in July, relieving some pressure on the Federal Reserve to tighten monetary policy by reducing its bond purchasing program sooner rather than later.

The modest shift in monetary policy expectations after U.S. CPI saw an annual rise of 5.4% in July is helping to support gold prices; however, some analysts warn that the market still has a lot of ground to make up to undo the damage from Sunday’s flash crash.

For many analysts, gold’s first hurdle to overcome is $1,760 an ounce. December gold futures last traded at $1,751.50 an ounce, up 1% on the day.

In a recent research note, Lukman Otunuga, senior research analyst at FXTM, said that gold’s technical outlook after Sunday’s selloff is heavily bearish.

“Sustained weakness below $1760 may result in a decline back towards $1700 and below. Alternatively, a breakout above $1760 could trigger a move towards $1792 and $1800,” he said.

Ipek Ozkardeskaya, senior analyst at Swissquote, said that the sun could be setting on higher gold prices following the inline inflation data.

“Gold missed its chance to shine over the past months. What would’ve made gold prices shine was soaring inflation expectations and falling U.S. yields. But investors preferred piling into the stock markets and to the cryptocurrencies, leaving gold behind the global risk rally. Now that the U.S. yields are preparing to rebound, and inflation expected to soften, gold will likely lose its major bullish pillars, and dive deeper,” she said in a report Wednesday.

Ozkardeskaya added that the one thing that could drive gold prices higher is a correction in equity markets. Following the latest inflation data, the S&P 500 rose to a new intra-day record high. The broad equity market index last traded at 4,440 points, roughly unchanged on the day.

“One thing that could save gold from falling more is an eventual equity selloff, a moody market, less risk appetite and the urge to liquidate the long equity positions with the fear of seeing a global market plunge triggered by either the delta contagion crisis or the tighter Fed expectations, or a combination of both,” she said.

Other analysts have noted that it will be difficult for gold prices to rally as it competes against historic bullish momentum in equity markets.

In a comment on Twitter, John Reade, chief gold strategist at the World Gold Council, said he is also watching the $1,760 level. In a recent interview with Kitco News, he also highlighted gold’s struggle against record equity valuations.

“Why do you need the diversity that gold offers when risk assets are at all-time highs pretty much every day,” he said.

However, Reade added that gold’s long-term fundamentals remain in place as the Federal Reserve will be limited to how much it can tighten its monetary policies going forward.

“The last tightening cycle stopped very soon after it started and was reversed because the global economy couldn’t handle higher interest rates,” he said.

Meanwhile, some see a new fundamental shift in the gold market as Sunday’s washout came after the precious metal was unable to push above its 200-day moving average on multiple tries.

Commodity analysts at Standard Charter said in a recent report there is a risk that gold retests its yearly low as prices remain above $1,790 an ounce. They added that significant support to watch is between $1,682 an ounce and $1,671, representing the 38.2% retracement level from the lows seen in 2015 to the record highs last year.

“Below $1682/71 would mark a significant-top to mark an important change of trend lower,” the analysts said in the report.

By Neils Christensen
Kitco News

Stocks were mostly higher on Tuesday, drifting to the upside as traders weighed concerns over the Delta variant’s latest spread against optimism over an ongoing rebound in economic activity.

The S&P 500 and Dow each eked out record intraday highs, while the Nasdaq dipped. A day earlier, both the S&P 500 and Dow sank, dragged down by energy stocks amid concerns over reinstated travel restrictions in China due to rising coronavirus infections. Investors on Tuesday eyed the passage of a sweeping $1 trillion infrastructure bill by the U.S. Senate, with the legislation to rebuild roads, bridges and other physical infrastructure across the country now headed to the House of Representatives. 

U.S. West Texas intermediate crude oil futures (CL=F) advanced Tuesday to recover after reaching a three-week low on Monday. Treasury yields rose across the curve, and the benchmark 10-year yield broke above 1.34%. 

Shares of AMC Entertainment (AMC) gained after the movie theater operator topped second-quarter revenue estimates, with customers’ return to the theaters taking place more forcefully than anticipated at the start of the summer. Shares of peer “reopening” stock Planet Fitness (PLNT), however, dipped after the gym’s full-year sales and profit outlook missed estimates, suggesting a slower-than-expected consumer return to in-person workouts. 

Investors this week have been appraising the extent of the growth slowdown that might be triggered by the latest resurgence in domestic and global coronavirus cases. According to a number of economists, the virus has already set off a measurable deceleration in U.S. consumer spending. 

“In the last couple of weeks, we’ve started to see a little bit of pullback in some of the travel and entertainment-type categories, really with the most noticeable pullback in spending on airlines,” JPMorgan Chase senior economist Jesse Edgerton told Yahoo Finance on Monday, citing Chase credit card spending data. “It’s still a small decline compared to the absolute collapse essentially to zero that happened during the first COVID wave back in March and April of last year … Now that we’re at a higher level and people are starting to travel again to some extent, it looks like they’re pulling back more than they did when they were still at very low levels last year.” 

Others, however, believe that these concerns will ultimately deflate, especially given they are unlikely to catalyze the same kind of economy-wide shutdowns that characterized the restrictions last year. 

“I think lot of the fears around the Delta variant in particular are a bit overblown,” Elyse Ausenbaugh, JPMorgan Private Bank global market strategist, told Yahoo Finance. “Although I think investors are grappling with the Delta variant and treating that as a primary brick in the so-called ‘wall of worry,’ I don’t think it’s something that derails the longer-term view.”

“Ultimately, investors are going to stay focused on those super-strong fundamentals, like easy financial conditions, robust consumer demand and also that labor market recovery,” she added. 

Policymakers have also taken note of the pick-up in economic activity, and two Federal Reserve officials on Monday suggested the U.S. economy was nearing the threshold of “substantial further progress” in recovering that would trigger a shift away from highly accommodative monetary policy. Federal Reserve Bank of Atlanta President Raphael Bostic said the economy “would have made the ‘substantial progress’ toward the goal” set by the central bank if U.S. job gains come in as strongly as they did in June and July for another couple months, according to Bloomberg. And Richmond Federal Reserve President Thomas Barkin, likewise, said “on the price side, we made substantial progress,” with inflation running well above the central bank’s achieving 2% average inflation. 

Emily McCormick·Reporter

TOKYO, Aug 9 (Reuters) – The dollar climbed against major peers on Monday, reaching a four-month high versus the euro, as traders positioned for an earlier tapering of Federal Reserve stimulus.

The greenback strengthened as far as $1.1742 to the single currency , extending a 0.6% pop from Friday, when a strong U.S. jobs report stoked bets that a reduction in asset purchases could start this year and higher interest rates could follow as soon as 2022.

The dollar index , which tracks the U.S. currency against six rivals, rose to a two-week top 92.915.

The dollar also hit an almost two-week high of 110.37 yen .

“U.S. payrolls were a game-changer,” Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a client note.

The dollar index is eyeing a close above 93, while the currency could head for $1.1704 per euro, Weston wrote, adding that it could climb further versus the yen too should U.S. yields continue to tick higher.

The benchmark 10-year Treasury yield jumped 8 basis points on Friday to a two-week high of 1.3053%. There was no trading in Tokyo on Monday with Japan shut for a national holiday. Singapore markets were also closed.

Friday’s non-farm payroll report showed jobs increased by 943,000 in July compared with the 870,000 forecast by economists in a Reuters poll. Numbers for May and June were also revised up. read more

The Fed has made the labor market recovery a condition of tighter monetary policy, and most officials back the view that a jump in inflation will prove transitory, though there is debate over how prolonged it could be.

Traders will be keenly watching a U.S. consumer price report on Wednesday.

Last week, Fed Vice Chair Richard Clarida suggested that conditions for hiking interest rates might be met as soon as late 2022.

The dollar rallied against its Australian and New Zealand counterparts on Monday, jumping 0.3% to as high as $0.7330 per Aussie and up 0.4% to $0.6980 per kiwi .

SYDNEY (Reuters) – The dollar was poised to push higher on Thursday as hawkish comments from the U.S. Federal Reserve led markets to bring forward the likely timing of a policy tightening there, while action in Europe and Japan remain distant prospects.FILE PHOTO: Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking/File Photo

The euro was down at $1.1837, having recoiled from a top of $1.1899 overnight and marking another failure to crack resistance around $1.1910.

The dollar also bounced to 109.51 yen, from a trough of 108.71 on Wednesday, negating what had been a bearish break on the downside.

The rally came after Fed Vice Chair Richard Clarida said conditions for an interest rate hike could be met in late 2022, setting the stage for a move in early 2023.

He and three other Fed members also signalled a move to taper bond buying later this year or early next depending on how the labour market fared in the next few months.

“It is reflective of a hawkish drift among the committee about the risks of more persistent inflation, and what that might mean for achieving the Fed’s new inflation framework,” said Brian Daingerfield, an analyst at NatWest Markets.

“This is all to say that the stakes for Friday’s payrolls, and subsequent payrolls, are sky high.”

Predicting the jobs report with any confidence remains particularly tricky as the spread of the Delta variant and labour bottlenecks roil the market.

Thus, while the median forecast for payrolls is 870,000 the range of estimates stretches from 350,000 to 1.6 million.

Adding to the murkiness were Wednesday’s mixed data where a surprisingly weak ADP report on private hiring clashed with the strongest ever reading for U.S. services.

Clarida’s comments led investors to price in slightly more chance of a hike in late 2022/early 2023 and to a flattening of the Treasury yield curve as short-term yields rose.

Such a move would likely come well ahead of any tightening by the European Central Bank, which is still battling to get inflation near its target.

In contrast, the Bank of England is much nearer to tapering and could expand on timing at a policy meeting later on Thursday.

That outlook helped the pound rally early in the year, though it has gone largely sideways on the last couple of months. It was last pinned near support at $1.3884, having repeatedly failed to clear resistance above $1.3980.

All these central banks are laggards compared with the Reserve Bank of New Zealand (RBNZ), which seems likely to hike rates at its next policy meeting on Aug. 18, making it the first in the developed world to move since the pandemic hit.

A super-strong jobs report on Wednesday only added to the case for New Zealand tightening and sent the kiwi surging to a one-month peak of $0.7088 overnight, before steadying at $0.7041.

Reporting by Wayne Cole; Editing by Sam Holmes

An inflation indicator that the Federal Reserve uses as its key guide rose 3.5% in June, a sharp acceleration that was nonetheless right around Wall Street expectations, the Commerce Department reported Friday.

The personal consumption expenditures price index, which excludes food and energy, was expected to increase 3.6% at a time when the U.S. economy has seen its highest inflation pressures in more than a decade.

That gain was slightly ahead of the 3.4% May increase and represents the biggest move since July 1991.

Fed officials have said they expect the inflation surge to be transitory as it has come largely from industries sensitive to the economic reopening, as well supply chain bottlenecks and other issues likely to fade. The central bank targets 2% as its desired inflation goal, though officials are willing to tolerate higher levels temporarily as the economy tries to get back to full employment.

The core PCE index rose 0.4% month over month, which was below the 0.6% Dow Jones estimate, indicating that inflationary pressures may be starting to ebb at least a bit.

Personal income and spending numbers, however, were better than expectations as consumers flush with stimulus cash kept the economic rebound going.

Income rose 0.1%, better than the estimate for a 0.2% decline, while spending increased 1% against a 0.7% forecast.

Employment inflation also continued to increase.

Compensation costs rose 0.7% for the three-month period ending in June while wages and salaries were up 0.9%. For the year, compensation costs increased 2.9%, up from 2.7% a year earlier, according to a separate report Friday from the Labor Department.

On the price inflation front, the PCE index including food and energy increased 4% from a year earlier, its largest increase since July 2008, just before the worst of the financial crisis hit. Energy prices rose 24.2% and food moved 0.9% higher.

The eurozone’s economy grew by 2% in the second three months of the year, taking the region out of recession.

New figures suggest there was growth in all the individual national economies which reported data.

The 19-nation bloc had suffered a so-called double-dip recession when the economy contracted in the previous two quarters.

However, the eurozone remains 3% down from its pre-pandemic level in late 2019.

A recovery is under way in the region after the surge in coronavirus infections in the winter.

In Italy and Spain, two countries whose economies were badly damaged by the pandemic, growth approached 3% in both.

There was an even stronger rebound in Austria and Portugal, with the latter reporting its economy had expanded by 4.9%.

The eurozone’s two largest economies saw more moderate growth, 1.5% in Germany and 0.9% in France.

The growth statistics are first estimates, so there is little detail showing the breakdown of the pattern of recovery.

However, household spending made an important contribution in France, Germany and especially in Spain. In France there was a surge in the hotel and restaurant trade of 29%.

Andrew Kenningham, chief Europe economist at Capital Economics, said Portugal’s rebound might reflect “a slightly less disastrous tourism season than Spain’s”.

He forecasted “another strong number for eurozone GDP” in the third quarter of the year, which “would bring the economy close to, but below, its pre-pandemic level”.

In contrast, the US has closed that gap, however, US employment is still down and economic activity is below where it probably would have been had there not been the pandemic.

Other new eurozone figures showed the number of people unemployed fell by more than 400,000 in June, though it is still one million higher than the low it hit early last year.

By Andrew Walker
BBC World Service economics correspondent

Brazil’s central government posted a $14.5 billion budget deficit in June, Treasury figures showed on Thursday, much smaller than a year ago thanks to rising tax revenues and lower crisis-related spending, but still more than economists had expected.

The government reported a primary budget deficit, excluding interest payments, of 73.6 billion reais ($14.5 billion) last month, compared with a 194.9 billion reais deficit last June.

That marked a 65% decline in real terms, Treasury said. But it was wider than the 63.4 billion shortfall forecast in a Reuters poll of economists.

Net revenue jumped 57% in real terms to 110.5 billion reais and spending fell 34.6% in real terms to 184 billion reais, Treasury said. Emergency pandemic-fighting spending in June plunged 85% from a year ago to 12.7 billion reais.

In the first half of this year the government ran a deficit of 53.7 billion reais, significantly smaller than the 417.3 billion reais deficit in the same period last year, Treasury said.

The accumulated primary deficit in the 12 months through June was 401 billion reais, worth 4.7% of gross domestic product, Treasury said.

In its bimonthly spending and revenue report last week, the Economy Ministry lowered its forecast for this year’s primary budget deficit to 155.4 billion reais, or 1.8% of GDP, from a previous forecast of a 187.7 billion reais deficit.

BRASILIA, July 29 (Reuters)
Reporting by Jamie McGeever
Editing by Chris Reese and Leslie Adler

The U.S. economic recovery is still on track despite a rise in coronavirus infections, the Federal Reserve said on Wednesday in a new policy statement that remained upbeat and flagged ongoing talks around the eventual withdrawal of monetary policy support.

In a news conference following the release of the statement, Fed Chair Jerome Powell said the U.S. job market still had “some ground to cover” before it would be time to pull back from the economic support the U.S. central bank put in place in the spring of 2020 to battle the coronavirus pandemic’s economic shocks.

“I would want to see some strong job numbers” in the coming months before reducing the $120 billion in monthly bond purchases the Fed continues to make, he told reporters.

But Powell also downplayed, at least for now, the risk that the renewed spread of the coronavirus through its more infectious Delta variant will put the recovery at risk or throw the Fed off track as it plans an exit from crisis-era policies.

“It will have significant health consequences” in the areas of the country where outbreaks are intensifying, Powell said. Yet in the prior waves of coronavirus infections “there has tended to be less in the way of economic implications … It is not an unreasonable expectation” that would remain the case this time, he added.

“It seems like we have learned to handle this,” with progressively less economic disruption, Powell said, even as he acknowledged a fresh outbreak might to some degree slow the return of workers to the labor market or disrupt planned school reopenings in the fall.

The Fed’s policy statement, issued after the end of a two-day policy meeting, reflected that confidence as the central bank continues debating how to wind down its bond purchases.

There appeared to be progress in that discussion, though no clear timetable for reducing the bond purchases. Powell said there was “very little support” for cutting the $40 billion in monthly purchases of mortgage-backed securities “earlier” than the $80 billion in Treasuries, and that once the process begins “we will taper them at the same time.”

Overall, however, the Fed seemed unfazed by spread of the Delta variant, even though new daily coronavirus infections have roughly quadrupled since the Fed’s June 15-16 policy meeting.
Though vaccinations have slowed – and Powell plugged inoculation as the best chance to get the economy durably back to normal – the Fed said it still expected vaccinations to “reduce the effect of the public health crisis on the economy.”

That should translate into strong job growth, Powell said, and eventually allow the Fed to move away from its crisis-era programs.

In December, the Fed said it would not change its asset-buying program until there had been “substantial further progress” in repairing a labor market that was then 10 million jobs short of where it was before the pandemic.

That number is now below 7 million, and the Fed for the first time acknowledged the economy had taken a step towards its benchmark for trimming the purchases.

“The economy has made progress, and the (Federal Open Market) Committee will continue to assess progress in coming meetings,” the Fed said in language pointing towards a possible reduction in bond purchases later this year or early in 2022.

The Fed also said that higher inflation remained the result of “transitory factors,” and was not an imminent risk to the economy or the Fed’s policy plans.
Along with leaving its bond-buying program unchanged, the central bank on Wednesday kept its overnight benchmark interest rate near zero.

Karim Basta, chief economist at III Capital Management, said the “incrementally more upbeat” policy statement opened the door to a September bond taper announcement if job growth comes in strong and the coronavirus caseload does not dent spending.

Acknowledging some progress towards their goals “seems designed to give them the option to announce” as soon as September their plans for winding down the bond purchases, he wrote.

The S&P 500 (.SPX) index, which was modestly lower before the release of the policy statement, ended the session flat. Yields on U.S. Treasuries fell in choppy trading, while the dollar (.DXY) was slightly weaker against a basket of currencies.

Reporting by Howard Schneider and Jonnell Marte Editing by Paul Simao

A deepening selloff in Chinese stocks spread to the bond and currency markets on Tuesday as unverified rumors swirled that U.S. funds are offloading China and Hong Kong assets.

The speculation, which included talk that the U.S. may restrict investments in China and Hong Kong, triggered a late afternoon bout of selling by traders in Asia who had already been dumping stocks in the crosshairs of Beijing’s sweeping regulatory crackdowns. The Hang Seng Tech Index plunged as much as 10% in Hong Kong, the yuan slid to its weakest since April against the dollar and Chinese bonds sank.

The dramatic moves underscored how fragile investor confidence has become after a months-long regulatory onslaught by Beijing that only seems to be getting worse. Traders fear the latest crackdown on the nation’s education, food delivery and property sectors could expand to other industries such as health care, as China looks to tighten its grip on Big Tech and reduce the wealth gap.

“The spread of declines from the Chinese equities space into the yuan signals that the concerns over regulatory risk in China might have taken a turn for the worst,” said Terence Wu, foreign-exchange strategist at Oversea-Chinese Banking Corp. in Singapore.

Treasuries climbed with the greenback and the yen as investors sought havens. The yield on China’s most actively traded 10-year government notes rose seven basis points to 2.94%, the most in a year. The offshore yuan fell as much as 0.6% to 6.52 per dollar and one-month volatility in the currency pair posted the biggest jump since May.

“Although we can’t verify if it’s true or not, the market fears that foreign capital will flow out from the Chinese stock market and bond market on a large scale, so sentiment is badly hurt,” Li Kunkun, a trader from Guoyuan Securities Co. said of the rumors that circulated among traders late in the Asia day.

The selloff also spread into the offshore Chinese credit market. High-yield notes dropped as much as 5 cents on the dollar, while investment-grade bond spreads widened by 10 to 15 basis points.

Investors in some of China’s most vibrant sectors — from technology to education — have found themselves in the firing line this month as Beijing attempts to rein in private enterprises it blames for exacerbating inequality, increasing financial risk and challenging the government’s authority. Policy makers’ seeming acceptance of short-term pain for stockholders in pursuit of China’s longer-term socialist goals has been a rude awakening for investors.

“The key concern now is whether regulators will do more and expand the crackdown to other sectors,” said Daniel So, strategist at CMB International Securities Ltd. “The regulatory concerns will be the key overhang to the market for the second half.”

So added that it was too soon in his opinion for investors to “bottom fish.”

Technology and education shares retreated once again Tuesday while property stocks also fell. Tencent Holdings Ltd. slumped 9%, most in about a decade, after the company’s music arm gave up exclusive streaming rights and was hit with fines. Its WeChat social media platform has stopped taking new users as it undergoes “security technical upgrade” in accordance with relevant laws and regulations. Meituan fell as much as 18%, its biggest decline ever, as investors digested new rules on online food platforms.

Turnover on Hong Kong’s main equity board reached a record high of HK$361 billion ($46 billion). The Hang Seng Index slid 4.2%, taking its two-day loss to 8.2%, the most since the global financial crisis.

Stocks had tumbled in “panic selling” on Monday after regulators on Saturday published reforms that will fundamentally alter the business model of private firms teaching the school curriculum. Hong Kong’s major retail brokers lowered margin financing for battered Chinese education stocks as investors suffered steep losses.

“There is no anchor for us to justify the stock valuations now given the regulation uncertainties,” said Dai Ming, a Shanghai-based fund manager at Huichen Asset Management. “In the past, the market was expecting normal regulations on certain sectors, but now it looks like the government can even tolerate killing a whole industry or some leading companies when it’s needed.”

By Jeanny Yu and Livia Yap — With assistance by Chester Yung, Jing Zhao, Tania Chen, Rebecca Choong Wilkins, and Ishika Mookerjee