U.S. out of Afghanistan, Zoom Tumbles, China Economy Slows - What's Moving Markets

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U.S. out of Afghanistan, Zoom Tumbles, China Economy Slows - What's Moving Markets
Credit: © Reuters.

By Geoffrey Smith 

Investing.com -- The U.S. completes its withdrawal of troops from Afghanistan. International travel is getting harder as Covid-19 rears its ugly head again. Zoom Video tumbles after predicting slower growth, while China's economy slowed sharply in August due to Covid-related lockdowns. Here's what you need to know in financial markets on Tuesday, 31st August.

1. U.S. completes Afghanistan withdrawal

The U.S. has completed its withdrawal of military personnel from Afghanistan after 20 years of fighting, the longest war in the country’s history.

While a semblance of order has been restored to the final days of the withdrawal, the initially chaotic scenes triggered by the Taliban’s rapid takeover of the country have damaged the international and domestic standing of President Joe Biden, and led to crowing by official Chinese and Russian commentators over the perceived worthlessness of U.S. security guarantees. 

The upheaval has, however, still not resulted in any clear impact on global markets. In particular, the dollar has continued to be guided by expectations for monetary policy. Even against alternative haven currencies such as the Swiss franc and the Japanese yen , the dollar has risen over the last month.

2. Transatlantic travel gets tougher

The U.S. and European Union moved to tighten travel restrictions on each other, in a response to rising Covid-19 numbers on both sides of the Atlantic.

The EU issued guidance to member states that only fully-vaccinated people should be allowed to travel freely to Europe. The guidance isn’t binding as member states retain sovereignty over public health measures.

The U.S. for its part raised the alert status on arrivals from Germany and Switzerland (as well as Canada), reflecting their increasing case numbers.

The moves weighed on European flag carriers in early trading in Europe: IAG (LON: ICAG ), the owner of Iberia, Vueling and (non-EU-based) British Airways, fell 3.0% to test a six-month low, while Deutsche Lufthansa (DE: LHAG ) fell 1.1%.

3. Stocks set to edge higher; Zoom under pressure

U.S. stocks are set to open higher later, still supported by hopes of a late and gentle beginning to the reduction of monetary stimulus.

By 6:20 AM ET (1020 GMT), Dow Jones futures were up a little less than 0.2%, while the S&P 500 and Nasdaq 100 futures contracts were both up by a similar amount. The Dow had underperformed on Monday as reopening trades again suffered due to Covid-related newsflow.

Stocks likely to be in focus later include Zoom Video, which fell 12% in after-hours trading on Monday after predicting a slowdown in revenue growth from last year. Revenue grew ‘only’ 54% year-on-year in the second quarter. Also in focus will be Chinese gaming company NetEase (NASDAQ: NTES ), which reported better-than-expected numbers to soften the multiple blows it has received from regulators in recent weeks. Cybersecurity expert Crowdstrike heads a very short earnings roster after the close.

4. Chinese economy slows; European data mixed

The extent of the Chinese economy’s slowdown under pressure from the latest wave of Covid-19 was apparent in the country’s official purchasing managers indices for August. The manufacturing PMI slowed to 50.1, only a whisker above the line separating growth from contraction. The services index however plunged into contractionary territory at 47.5, its lowest reading since February 2020.

There was also evidence of a slowdown in parts of Europe: French consumer spending fell by 2.2% on the month in July, while lending to U.K. households collapsed after the end of a tax holiday on house purchases.

In more positive developments, the number of unemployed in Germany fell more sharply than expected in August, by 53,000.

5. Oil can't break above $70 after Ida; API eyed

Crude oil prices again struggled with the $70 a barrel mark, as the aftermath of Hurricane Ida revealed no lasting damage to the Gulf of Mexico’s production capacity. Gasoline RBOB Futures prices were also relatively calm despite the prospect of a slow return to full throughput at refineries with just under 2 million barrels a day of capacity.

The effects of Ida may complicate the task of interpreting the American Petroleum Institute’s weekly data on U.S. crude and products inventories at 4:30 PM ET.

By 6:25 AM ET, U.S. crude futures were down 0.9% at $68.64 a barrel, while Brent futures were down 0.6% at $71.80 a barrel.

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