U.S. Stock Futures Slip as Investors Move to Safety of Government Bonds

By Xie Yu and Avantika Chilkoti

U.S. stock futures pointed to a lower open and investors piled into the safety of government bonds as jitters mounted about the recovery from Covid-19 lockdowns.

Stock futures linked to the S&P 500 were down 0.4%. European stocks traded slightly higher, with the Stoxx Europe 600 index up 0.3%. Asian markets were mostly lower as China's recent market rally lost steam.

Global investors appeared to grow increasingly concerned about the impact of the coronavirus spread in the U.S. on the economic outlook, and sought shelter in government bonds Friday. The yield on the 30-year Treasury fell to 1.256%, and the yield on the 10-year Treasury hit 0.578%, both their lowest since April.

"At some stage you accept the reality that Covid hasn't gone away, that it's going to have an impact on all economies in terms of social distancing until we have a vaccine," said Brian O'Reilly, head of market strategy for Mediolanum International Funds.

In China an uninterrupted streak of stock market gains ended Friday, with the Shanghai Composite Index closing nearly 2% lower. It had risen 16.5% over eight straight sessions of gains, the biggest eight-day percentage gain since March 2008, according to Dow Jones Market Data.

Perhaps seeking to avoid a repeat of the stock market bubble and bust of 2015, Chinese authorities have signaled concerns about overshooting, with a state-run financial newspaper stressing the importance of long-term investment.

Friday's fall may have been propelled by actions by state-owned investors. Filings showed that big players such as the National Council for Social Security Fund had unloaded stocks, according to Alvin Ngan, strategist at Zhongtai International Holdings, a Hong Kong-based brokerage.

"The cooling tone from the authorities could take some of the sheen off the frenetic market, " he said.

In commodities, Brent crude, the international benchmark for oil prices, fell 2.1% to $41.46 a barrel, amid concerns that the rising number of Covid-19 cases could upset any increase in energy demand.

In individual stocks, shares in Carlsberg rose 5% after the Danish brewing company said its businesses in Europe and China were rebounding after coronavirus lockdowns.

Ahead of the opening bell in New York, Franklin Covey was down 3.3% in premarket trading. The maker of management and organization products and services reported disappointing sales for its most recent quarter as schools and businesses switched to online tools.

Write to Xie Yu at [e-mail] and Avantika Chilkoti at [e-mail]