Asian equities look set for a mixed open as investors weigh positive sentiment from the avoidance of a US government shutdown against the prospect global interest rates are likely to stay elevated.
(Bloomberg) — Asian equities look set for a mixed open as investors weigh positive sentiment from the avoidance of a US government shutdown against the prospect global interest rates are likely to stay elevated.
Futures contracts on the S&P 500 rose 0.4% in early Asian time after a last-minute spending deal at the weekend to avoid a shutdown of the US government. Contracts for Japanese shares slipped 0.2%, while those for Australia dropped 0.5%. China markets are shut for a week-long holiday, while a number of Australian states are also closed.
While markets may take some early relief from the US deal, attention will quickly shift to manufacturing activity and jobs data this week after the head of the Federal Reserve Bank of New York said Friday policy makers should leave interest rates high for some time.
“Financial markets were bracing for a shutdown, so there’s an element of relief, but it’s only a temporary lifting of one of the clouds hanging over the markets now,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “Interest rates and Fed hawkishness remain the name of the game and the main driver of the markets over the next few weeks.”
Read more: Traders Win Reprieve After ‘Political Circus’ of Shutdown Fight
A mixed opening on the first trading day of October may put a temporary stay on a torrid period for global financial markets. Elevated interest rates made the July-to-September quarter the worst for MSCI’s all-country stock index since September 2022 as surging oil prices added fears over inflation and slowing economic growth. Bonds meanwhile had their biggest monthly selloff in September since February
While global rates may be close to their peaks, central banks are being hard-pressed to walk a fine line between reining in rising prices and skirting a recession. Fed chief Jerome Powell and his European Central Bank counterpart Christine Lagarde are both due to speak in the coming week and investors will scrutinize any reaction from them following data that suggested inflation has markedly slowed.
“Unless we get a clearly changed message from the key central banks – urgently — these past few weeks’ big market moves are unlikely to be over,” said Erik Nielsen, chief economics advisor at UniCredit Group. “The combination of high yields and zero growth typically raises concerns about financial stability, and while the key financial institutions are stronger today than in the past, it would be foolish to dismiss the rising risk.”
Read more: Once Unthinkable Bond Yields Now the New Normal For Markets
Key events this week:
- China has week-long holiday
- Japan Sept. quarter Tankan, Monday
- Bank of England policy maker Catherine Mann speaks on monetary policy, Monday
- Fed Chair Jerome Powell and Philadelphia Fed President Patrick Harker participate in a roundtable discussion, Monday
- New York Fed President John Williams moderates discussion on climate risk, Monday
- Cleveland Fed President Loretta Mester speaks on economic outlook, Monday
- US ISM manufacturing index, Monday
- Australia rate decision, Tuesday
- Atlanta Fed President Raphael Bostic speaks on economic outlook and inflation, Tuesday
- August US JOLTS report, Tuesday
- Eurozone services and composite PMIs, Wednesday
- ECB President Christine Lagarde gives welcome address at conference, Wednesday
- US ISM services index, Wednesday
- France industrial production, Thursday
- BOE Deputy Governor Ben Broadbent, Riksbank First Deputy Governor Anna Breman participate at panel discussion, Thursday
- San Francisco Fed President Mary Daly speaks at the Economic Club of New York, Thursday
- Germany factory orders, Friday
- September US nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.5% as of 7:11 a.m. Tokyo time
- Hang Seng futures fell 0.7%
- S&P/ASX 200 futures fell 0.5%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0567
- The Japanese yen fell 0.1% to 149.48 per dollar
- The offshore yuan fell 0.1% to 7.2982 per dollar
- The Australian dollar was little changed at $0.6436
Cryptocurrencies
- Bitcoin rose 0.3% to $27,200.5
- Ether rose 0.2% to $1,677.7
Bonds
- The yield on 10-year Treasuries was little changed at 4.57% on Friday
- Japan’s 10-year yield advanced one basis point to 0.765% on Friday
- Australia’s 10-year yield advanced three basis points to 4.49% on Friday
Commodities
- West Texas Intermediate crude rose 0.3% to $91.06 a barrel
- Spot gold fell 0.9% to $1,848.63 an ounce on Friday
This story was produced with the assistance of Bloomberg Automation.
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