Stocks Waver as China Intensifies Crypto Crackdown: Markets Wrap

Stocks struggled for direction after China intensified its sweeping regulatory crackdown on cryptocurrencies. Bitcoin, Ether and other digital tokens tumbled.

In another blow to investor sentiment, the world’s second-largest economy said crypto-related transactions will now be considered illicit financial activity. The decision strikes at the heart of a market that’s boomed this year, while adding to worries about increasingly stringent regulations to various industries from technology to after-school tutoring and ride-hailing.

“China is dealing with a few fiscal systemic challenges right now,” said David Tawil, president of ProChain Capital. “My expectation is that this is ‘for real’ and that China will not reverse course on this position anytime soon, if ever. Nevertheless, if this move was inevitable, better that it happens sooner, so that the investment community can digest and move on.”

The S&P 500 fluctuated as financial companies rose, while tech shares fell. The dollar climbed. The Nasdaq Golden Dragon China Index -- which tracks some of the Asian nation’s biggest firms listed in the U.S. -- sank as much as 3.6%. Crypto-related stocks such as Riot Blockchain Inc. and Marathon Digital Holdings Inc. tumbled.

Read: Summers Says Crypto Needs Government Regulation to Be Viable

Volatility in U.S. stocks and major developed currencies is swinging in lockstep by the most in more than a year, as risks from China compete with central banks to drive market moves. Traders pulled $28.6 billion from U.S. equity funds in the week through Sept. 22 -- the largest redemption since February 2018, according to a Bank of America Corp. note, which cited EPFR Global data.

Read: Powell Says Economy Is Adjusting to Demands of a ‘New Reality’

The U.S. economy has met the Federal Reserve’s conditions for starting to reduce its asset purchases soon, according to two regional Fed bank presidents.

“I support starting to dial back our purchases in November and concluding them over the first half of next year,” Fed Bank of Cleveland President Loretta Mester noted. Separately, her Kansas City counterpart Esther George said “the criteria for substantial further progress have been met,” referring to the central bank’s taper test.

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 11:12 a.m. New York time
• The Nasdaq 100 fell 0.4%
• The Dow Jones Industrial Average was little changed
• The Stoxx Europe 600 fell 0.8%
• The MSCI World index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%
• The euro fell 0.2% to $1.1715
• The British pound fell 0.3% to $1.3674
• The Japanese yen fell 0.3% to 110.67 per dollar

Bonds

• The yield on 10-year Treasuries advanced two basis points to 1.45%
• Germany’s 10-year yield advanced three basis points to -0.23%
• Britain’s 10-year yield advanced two basis points to 0.93%

Commodities

• West Texas Intermediate crude rose 0.6% to $73.73 a barrel
• Gold futures rose 0.2% to $1,753.30 an ounce

— With assistance by Sunil Jagtiani, Abigail Moses, Lynn Thomasson, and Vildana Hajric