Asian stocks and US stock futures opened marginally higher in a cautious start to trading Monday after Treasury yields surged last week on rate-hike bets and shares on Wall Street ended lower Friday.
(Bloomberg) — Asian stocks and US stock futures opened marginally higher in a cautious start to trading Monday after Treasury yields surged last week on rate-hike bets and shares on Wall Street ended lower Friday.
Shares rose in Japan and Australia, while contracts for Hong Kong equities pointed to declines. As worries about the banking sector abate and inflation pressure persists in the US, investors have upped wagers for at least one more interest rate increase from Federal Reserve this year, which is rippling through global markets.
The S&P 500 futures rose 0.2% after the index 0.2% by the same amount on Friday, trimming its gain for the week to 0.8%. Nasdaq 100 futures were little changed after the gauge squeezed out a 0.1% gain last week as policy-sensitive technology names like Microsoft Inc. and Apple Inc. dragged on the benchmark. Swaps traders upped bets for a rate increase by June and pricing suggests a quarter point hike has better than three-in-four odds for May.
The dollar traded within ranges of about 0.1% versus major peers early Monday after a gauge of greenback strength rose 0.4% last week.
Treasury yields continued their climb, with the rate-sensitive two-year advancing to around 4.12% Monday. It was driven higher last week by a measure of March retail sales showing core readings declined less than estimated and comments from Fed officials. Yields on government bonds in Australia and New Zealand climbed in early trading.
Looking ahead to this week, investors are awaiting the release of the Fed’s Beige Book and commentary from officials including John Williams, Raphael Bostic, Loretta Mester and Lisa Cook. Markets were rattled last week after Fed Governor Christopher Waller said he favored more policy tightening in the central bank’s battle with inflation.
“I don’t think all of the rate hikes have worked their way through the system and it looks as though the Fed is going to continue to tighten,” said Frances Stacy, director of strategy at Optimal Capital Advisors. “I don’t think we’re completely out of the woods yet, but that doesn’t mean that the risk is going to happen overnight, but when something does hit, markets can gap down pretty dramatically.”
Much of the focus in Asia will be on China and the strength of its economic recovery. Figures on Tuesday are projected to show gross domestic product expanded 3.9% in the first quarter from a year earlier, well below the government’s target for full-year growth of around 5%. March data may show increases in industrial output, investment and retail sales.
In Japan, shares of security companies rose after Prime Minister Fumio Kishida was targeted by an explosive device at an event he attended in central Japan, weeks before he hosts the world leaders for a G-7 summit. There was little discernible impact on wider Japanese markets.
Financials outperformed last week with JPMorgan Chase & Co. and Citigroup Inc. leading the charge after earnings and the sector will remain in the hot seat Monday when Charles Schwab Corp. and State Street Corp. report.
Investors will be looking for signs of health from Schwab, which has plunged nearly 40% this year as rising rates drove a spike in unrealized losses at the brokerage. Bank of America Corp. and Goldman Sachs Group Inc. will report later in the week as will Netflix Inc. and Tesla Inc.
While recent data suggested runaway prices were moderating somewhat, a Friday report suggested Americans are pessimistic. Inflation expectations jumped in April with consumers seeing prices climbing 4.6% on an annual basis, up from 3.6% in March, according to a University of Michigan survey.
In commodities, crude was little changed Monday after logging its fourth week of gains amid signs of a tightening global market. Gold was steady after a small decline last week and Bitcoin held above the key $30,000 level.
Key events this week:
- ECB President Christine Lagarde speaks at the Council of Foreign Relations in New York, Monday
- Fed’s Thomas Barkin speaks before the Richmond Association for Business Economics, Monday
- China GDP, retail sales, industrial production, Tuesday
- US housing starts, Tuesday
- Goldman Sachs and Bank of America release first-quarter earnings, Tuesday
- Fed’s Michelle Bowman discusses digital currency, Tuesday
- Eurozone CPI, Wednesday
- Fed releases Beige Book, Wednesday
- Fed’s John Williams gives a speech, Wednesday
- Fed’s Austan Goolsbee is interviewed on NPR, Wednesday
- China loan prime rates, Thursday
- Eurozone consumer confidence, Thursday
- US initial jobless claims, existing home sales, index of leading economic indicators, Thursday
- ECB issues report on March policy meeting, Thursday
- Fed’s Christopher Waller speaks at cryptocurrency-focused event, Thursday
- Fed’s Patrick Harker speaks on “monetary policy and housing”, Thursday
- Fed’s Loretta Mester discusses the economic and policy outlook, Thursday
- Fed’s Raphael Bostic discusses regional and national economic conditions, Thursday
- Fed’s Michelle Bowman and Lorie Logan speak at event, Thursday
- PMIs for Eurozone, Friday
- Japan CPI, Friday
- Fed’s Lisa Cook discusses economic research at an event, Friday
Some of the main moves in the market:
Stocks
- S&P 500 futures rose 0.2% as of 9:20 a.m. Tokyo time. The S&P 500 fell 0.2% Friday
- Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.2%
- Japan’s Topix rose 0.3%
- Australia’s S&P/ASX 200 Index rose 0.3%
- Hong Kong’s Hang Seng futures fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0988
- The Japanese yen was little changed at 133.88 per dollar
- The offshore yuan was little changed at 6.8744 per dollar
- The Australian dollar was little changed at $0.6710
Cryptocurrencies
- Bitcoin fell 0.3% to $30,264.82
- Ether fell 0.5% to $2,111.93
Bonds
- The yield on 10-year Treasuries advanced one basis point to 3.52%
- Australia’s 10-year yield advanced eight basis points to 3.40%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Vildana Hajric and Ritika Gupta.
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