The Federal Reserve's meeting will be closely watched for an idea about its plans for monetary policy as the US economy continues to improve
London (AFP) - US and European stock markets pulled back on Tuesday ahead of a Federal Reserve policy meeting and earnings reports by top tech firms.
Meanwhile, Hong Kong led a sell-off across most Asian stock markets, extending the previous day’s losses as traders were spooked by China’s latest crackdown on a range of industries.
New regulations on China’s tutorial sector – which has clobbered private education firms – along with more moves against tech firms and fresh rules for property and food delivery companies has traders wondering where Beijing will strike next, analysts said.
Hong Kong sank more than four percent to match Monday’s drop with investors running for cover after Beijing’s latest move to tighten control over the economy.
At the weekend, China said it would prevent after-school tutoring companies from making a profit, raising capital or going public, making it virtually impossible to invest in them.
Officials also looked to wind in tech giant Tencent, while unveiling new rules to protect hard-pressed drivers in the delivery business.
“China’s regulatory uncertainty is not going away,” said Rodrigo Catril at National Australia Bank.
“Indeed it looks to be broadening, with no clarity as to when and where it will end.”
In Hong Kong, the value of shares in firms caught in the regulatory sweep fell further, though losses for education firms were not as stark as on Monday.
Tencent was also hit after it was told to relinquish exclusive music label rights owing to apparent antitrust breaches.
Its shares fell by 10 percent, while Alibaba shed more than six percent. Food delivery firm Meituan lost more than 17 percent.
The rout in Chinese markets dampened sentiment in Europe.
“The weakness seen in Europe today appears to be a by-product of wider fears that a policy misstep from Beijing could have wider consequences for the global economy,” said Michael Hewson, chief market analyst at CMC Markets UK.
While Hewson said the fallout appears contained, he said the risk is that Chinese authorities overreach in their clampdown and spark widespread capital flight.
London stocks closed down 0.4 percent, Frankfurt 0.6 percent and Paris 0.7 percent.
On Wall Street, stocks pulled back off fresh record highs set on Monday as attention turned to the Federal Reserve’s key board meeting for some forward guidance on policy in light of the economic recovery and concerns about surging prices.
While the central bank is expected to maintain its accommodative stance for now, it is thought officials will begin discussing how to ease its bond-buying programme.
The tech-heavy Nasdaq Composite was down 1.7 percent ahead of earnings reports from market titans such as Apple, Google parent Alphabet and Microsoft after the closing bell.
“US tech stocks have led the declines this afternoon, with investors clearly showing a degree of hesitancy,” said market analyst Joshua Mahony at trading platform IG.
Market analyst Patrick J. O’Hare at Briefing.com said expectations had been running high they would turn in results surpassing those expected by analysts.
“The question is, can they surpass the high expectations, not only with their results but with their guidance/demand outlook?” he said.
- Key figures around 1530 GMT -
New York - Dow: DOWN 0.6 percent at 34,947.51 points
EURO STOXX 50: DOWN 0.6 percent at 4,064.83
London - FTSE 100: DOWN 0.4 percent at 6,996.08 (close)
Frankfurt - DAX 30: DOWN 0.6 percent at 15,519.13 (close)
Paris - CAC 40: DOWN 0.7 percent at 6,531.92 (close)
Tokyo - Nikkei 225: UP 0.5 percent at 27,970.22 (close)
Hong Kong - Hang Seng Index: DOWN 4.2 percent at 25,086.43 (close)
Shanghai - Composite: DOWN 2.5 percent at 3,381.18 (close)
Euro/dollar: UP at $1.1834 from $1.1802 at 2125 GMT
Euro/pound: DOWN at 85.26 pence from 85.41 pence
Pound/dollar: UP at $1.3877 from $1.3815
Dollar/yen: DOWN at 109.65 yen from 110.37 yen
Brent North Sea crude: FLAT at $74.51 per barrel
West Texas Intermediate: DOWN 0.3 percent at $71.73 per barrel