Stock Futures Slide, Crypto Hype Pauses: Moody's Bearish China Outlook Sparks Risk Off

Tuesday is shaping up to be a risk-off session, with futures trading in the red in premarket trading, while the dollar and Treasuries are the only major asset classes in the green.

Long-term Treasuries, as tracked by the iShares 20+ Year Treasury Bond ETF TLT, are up 0.7% in the premarket, on track to reach levels last seen on Sept. 20.

Investors are flocking to bonds and cash following Moody’s decision to lower China’s credit outlook from stable to negative, while retaining a long-term rating of A1 for the nation’s sovereign bonds. The rating agency also stated that China’s use of fiscal stimulus to support local governments and the ongoing property downturn pose risks to the nation’s economy.

Hong Kong’s Hang Seng Index closed 1.9% lower at 13-month lows, and the domestic Chinese A50 Index tumbled 1.8%, reaching November 2022 lows, effectively erasing the entire reopening rally.

Risk aversion has also paused the rally on Bitcoin BTC/USD and SPDR Gold Trust GLD, with both scarce assets recording minor losses as of 8:00 AM in New York.

Investors are awaiting the Institute for Supply Management’s survey on the services sector for November and the Job Openings and Labor Turnover Survey (JOLTS) data, both scheduled for release at 10:00 AM.

US Futures Performance On Tuesday

In premarket trading on Tuesday, the SPDR S&P 500 ETF Trust SPY edged down 0.3% to $455.30 and the Invesco QQQ ETF QQQ fell 0.47% to $384.49, according to Benzinga Pro data.

The CBOE Volatility Index, or VIX, is trading 2% higher, after rising 3.7% on Monday.

Economic Data To Watch

• The ISM Services PMI is expected to edge slightly higher from 51.8 in October to 52 in November, remaining in an expansionary territory.
  
• The number of job openings is forecasted to rise from 9.3 million in September to 9.553 million in October.

Stocks In Focus During Premarket

• US-listed Chinese stocks saw declines in the premarket trading: PDD Holdings Inc. PDD (down by 2.3%), Baidu Inc. BIDU (down by 1.9%), Tencent Music Entertainment Group TME (down 1.9%), JD.com Inc. JD (down 1.8%) Alibaba Group Holdings Ltd. BABA (down by 1.2%).
• GitLab Inc. GTLB rose 13%, after reporting better-than-forecasted quarterly results.
• The J.M. Smucker Company SJM was 3.2% higher, as the company raised profit guidance.
• Take-Two Interactive Software Inc. TTWO saw a 3.5% decline attributed to a pre-release leak of the Grand Theft Auto VI trailer on social media. Take-Two has officially confirmed that Grand Theft Auto VI is set for a 2025 launch, putting to rest earlier speculations of a potential release in the near future.

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