US share futures climbed and Asian equities crept higher in cautious trading as investors weighed the risk of recession and its impact on interest rates.
(Bloomberg) — US share futures climbed and Asian equities crept higher in cautious trading as investors weighed the risk of recession and its impact on interest rates.
Contracts for the S&P 500 and the Nasdaq 100 rose more than 0.4% early Monday after both benchmarks posted small gains on Friday. Shares opened higher in Japan and Australia, while futures for Hong Kong equities pointed to a slight decline.
Traders are in for another bumpy week, with the banking crisis casting a shadow over markets. On top of that, multiple Federal Reserve officials will speak, a key measure of US inflation is due and there are renewed geopolitical tensions with Russia to station tactical nuclear weapons in Belarus. Fed Minneapolis President Neel Kashkari said over the weekend that bank turmoil had increased the risk of a US recession.
Authorities are said to be considering expanding an emergency lending facility for US banks in ways that would give First Republic Bank more time to shore up its balance sheet. Yet investors in the bond market already see the wider damage in the sector running its course. They’re piling into wagers that a recession is around the corner and bets on any further interest rate hikes this year are being axed while expectations for rate cuts ramp up.
The dollar fluctuated, with a gauge of the currency was down less than 0.1%, while the yen steadied. Treasury yields climbed across tenors after rate on the benchmark 10-year declined five basis points on Friday. Bond yields in Australia and New Zealand headed lower.
In the stock market Friday, after a slide that reached 1% in the first hour of trading, the S&P 500 snapped back and notched its second straight week of gains. A gauge of US financial heavyweights climbed from its lowest level since November 2020.
“The recent banking crisis has heightened fears of a recession,” Ed Yardeni, president and chief investment strategist of his eponymous research firm, said in a Monday note. Still, Yardeni has not increased the odds of recession despite the pressure facing lenders and places a 60% probability of a soft landing. “We’re not convinced it will lead to a credit crunch that triggers a recession.”
Top US regulators said after a meeting Friday that while some banks are coming under stress, the overall financial system is still sound.
Global authorities continued trying to instill calm in financial markets following the recent failure of some US regional lenders and the near-collapse of banking giant Credit Suisse Group AG before its government-brokered takeover by rival UBS Group AG. European Central Bank President Christine Lagarde told European Union leaders that the region’s banking sector is strong, according to people familiar with the matter.
“The markets are definitely taking a wait-and-see approach, are going to look at a lot of the incoming data for a change, which we haven’t,” Carol Schleif, CIO at BMO Family Office, said on Bloomberg Radio. “We were told a couple weeks ago we were going to be a lot more data dependent than we’ve been able to be in the last couple of weeks and it’s actually really delightful.”
Elsewhere, oil extended its climb after a weekly gain. Gold was lower.
Key events this week:
- China industrial profits, Monday
- US wholesale inventories, US Conf. Board consumer confidence, Tuesday
- EIA Crude Oil Inventory Report, Wednesday
- Eurozone economic confidence, consumer confidence, Thursday
- US GDP, initial jobless claims, Thursday
- Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin speaks at event. Treasury Secretary Janet Yellen also speaks, Thursday
- China PMI, Friday
- Eurozone CPI, unemployment, Friday
- US consumer income, PCE deflator, University of Michigan consumer sentiment, Friday
- ECB President Christine Lagarde speaks, Friday
- New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.5% as of 9:06 a.m. Tokyo time. The S&P 500 rose 0.6% on Friday
- Nasdaq 100 futures rose 0.4%. The Nasdaq 100 rose 0.3%
- Japan’s Topix index rose 0.3%
- Australia’s S&P/ASX 200 Index rose 0.3%
- Hong Kong’s Hang Seng futures fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0770
- The Japanese yen was little changed at 130.83 per dollar
- The offshore yuan was little changed at 6.8702 per dollar
- The Australian dollar rose 0.1% to $0.6652
Cryptocurrencies
- Bitcoin rose 0.7% to $28,007.77
- Ether rose 0.8% to $1,776.37
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.39%
- Australia’s 10-year yield declined three basis points to 3.19%
Commodities
- West Texas Intermediate crude rose 0.6% to $69.67 a barrel
- Spot gold fell 0.2% to $1,974.77 an ounce
This story was produced with the assistance of Bloomberg Automation.
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