Global stocks run out of steam on China worries

A flare up in US- China tensions, signs of further regulatory crackdowns from Beijing and a rise in short- dated US Treasury yields doused the equity market rally on Wednesday, offsetting tailwinds from forecast- beating earnings on Wall Street.

MSCI’s global equity benchmark is hovering close to Monday’s seven- week high, though, and is on track for the best month in almost a year.

However, European stocks softened, led by a 2percent drop in mining and resources firms. Bank shares also slipped, with Deutsche Bank down 5percent despite forecast- beating earnings .

The losses started earlier in Asia, where tech stocks suffered hefty falls after China’s internet watchdog said it planned stricter registration rules for younger users.

US futures pointed to gains for Wall Street, with investors still in a chipper mood after Tuesday’s forecast- beating results from Google owner Alphabet and Microsoft.

“We have good US data in earnings which is very reassuring but valuation is very stretched in both the value as well as the growth sector,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.

“People are also getting a bit hesitant and are a bit worried because the amount of money that is going through will slow down with the Fed slowly starting to taper — but that is not necessarily a bad thing.”

Earnings reports from Ford, Coca- Cola, McDonald’s and Boeing are due later in the day.

Concern about more tension between Beijing and Washington weighed on markets too, after the US Federal Communications Commission voted to revoke the authorisation for China Telecom’s US subsidiary to operate in the US after nearly two decades, citing national security.

Currency and bond traders were looking to a slew of central bank meetings over the coming week for guidance.