Bonds catch their breath, Tencent tumbles again

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LONDON (Reuters) – The rally in the government bond market that had pushed US Treasury yields below 1.2% and the entire negative German curve came to a halt on Tuesday, although there were more problems in China as Internet giant Tencent has suffered another blow.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, New York, US July 28, 2021. REUTERS / Andrew Kelly

Rising bank stocks helped major European stock exchanges and Wall Street futures rise [.EU] but the real action was elsewhere.

Chinese state-run media calling online games “spiritual opium” was enough to push Tencent shares down 10% in Asia, wiping out $ 60 billion from its value just after its worst month in nearly ‘a decade.

The company was quick to say it would reduce children’s access to its flagship game Honor of Kings, but panic engulfed gaming rivals NetEase, XD and GMGE which all plunged between 8% and 15%.

There were other outbursts as well. Shares of Amsterdam-listed tech investment firm Prosus, which owns 29% of Tencent’s capital, fell more than 5%. European games companies Ubisoft and Evolution fell 2.6% and 5% and US listed shares of Netease fell 9% before the bell

“China has control over its tech sector and this has already resulted in a huge devaluation,” said Hasnain Malik, head of equity research at Tellimer.

He said there would be no reversal in Beijing’s direction, although the drop of more than 40% in many of China’s biggest tech companies since February means they may now be worth the effort. be “revisited”.

Graphic: Beaten,

The big currency drivers were the Australian dollar, which jumped half a percent after its central bank blocked plans to cut its bond buying program from next month despite ongoing lockdowns against coronaviruses.

The New Zealand dollar also rose after its central bank said it would look for ways to control house price inflation as the Swiss franc hit its highest level since November against the euro. [/FRX]

The US dollar hid near its one-month low after disappointing economic data on Monday. It also pushed the benchmark 10-year Treasury yield down to 1.151%, its lowest since July 20, although Tuesday’s moves pushed it back up to 1.19%. [US/]

“There is currently a certain bearish bias in the dollar,” said Vasileios Gkionakis, global head of currency strategy at fund manager Lombard Odier in Switzerland. “You are starting to see a rotation of growth away from the United States”

Graphic: The shares of the video game “Spiritual Opium” are plummeting,

NEGATIVITY

In European bond markets, the German 10-year yield rose less than a basis point to -0.475% after falling to its lowest level since early February on Monday when the entire German yield curve returned in negative territory.

The decline in yields around the world over the past two months means that there is now again over $ 16 trillion in negative yielding debt. It peaked at just over $ 18 trillion in December.

“If you go back a few months, worry about inflation was everywhere, but even in the United States now you don’t see the same kinds of concerns anymore,” Morgan Stanley chief economic adviser said, Reza Moghadam. “The challenge now is growth”.

In commodities markets, oil has stabilized after falling 3% on Monday due to a combination of US and Chinese economic concerns amid the sharp rise in COVID-19 Delta variant cases around the world .

Wuhan in China, where the virus first emerged in late 2019, said overnight it would test all 12 million of its residents after confirming its first cases of the Delta variant.

Brent crude rose 33 cents in London to $ 73.28 a barrel. US crude climbed to $ 71.56 per barrel while gold and industrial copper were both slightly lower at $ 1,810.45 per ounce and $ 9,594.50 per tonne respectively.

Additional reporting by Tom Arnold and Sujata Rao in London; Editing by Emelia Sithole-Matarise and Alison Williams


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