US and European stock futures climbed while a benchmark of Asian shares fluctuated in cautious trading as investors weighed the risk of recession and its impact on interest rates. Major currencies held to narrow ranges.
(Bloomberg) — US and European stock futures climbed while a benchmark of Asian shares fluctuated in cautious trading as investors weighed the risk of recession and its impact on interest rates. Major currencies held to narrow ranges.
Contracts for Euro Stoxx 50 advanced about 1% and those for the S&P 500 rose 0.6%. An Asian gauge swung between gains and losses, weighed down by Hong Kong stocks. China Petroleum & Chemical Corp. plunged as much as 7.7% on lower earnings while Chinese developers headed for a third day of drop after Greenland Holdings Group warned of further slowing in housing.
Sentiment in China was also dented by industrial profits data registering a decline in the first two months of the year as factories had yet to fully recover from a Covid-induced slump.
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.
A gauge of greenback strength was little changed. Hong Kong’s dollar slid and stayed near the weak end of its allowed trading band of 7.85 per US dollar, boosting expectations of an intervention by the Hong Kong Monetary Authority.
The two-year Treasury yield rose about eight basis points while the rate on the 10-year maturity gained about two basis points. Bond yields in Australia and New Zealand headed lower.
In the US 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. First Citizens Bank & Trust on Monday agreed to buy all deposits and loans of SVB Financial Group’s Silicon Valley Bank after it was seized by the regulators.
Investors will be closely watching data on personal consumption expenditures price index, which is the Fed’s preferred measure of underlying price pressure, that will come out later this week for direction on the US central bank’s rate path.
“Market continues to price in about 100 basis points of rate cuts for this year, defying the Fed’s latest dot plot projections,” Saxo Capital Markets strategists, including Charu Chanana, wrote in a note.
Elsewhere, oil was slightly higher after a weekly gain. Gold fell.
Key events this week:
- 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 0.6% as of 6:48 a.m. London time. The S&P 500 rose 0.6% on Friday
- Nasdaq 100 futures rose 0.6%. The Nasdaq 100 rose 0.3%
- Euro Stoxx 50 futures rose 1.1%
- Japan’s Topix index rose 0.4%
- Hong Kong’s Hang Seng Index fell 0.8%
- China’s Shanghai Composite Index fell 0.4%
- Australia’s S&P/ASX 200 Index rose 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0767
- The Japanese yen was little changed at 130.84 per dollar
- The offshore yuan fell 0.1% to 6.8765 per dollar
- The Australian dollar rose 0.1% to $0.6652
- The British pound was little changed at $1.2236
Cryptocurrencies
- Bitcoin rose 0.3% to $27,881.63
- Ether was little changed at $1,763.07
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.39%
- Australia’s 10-year yield declined two basis points to 3.19%
Commodities
- West Texas Intermediate crude rose 0.5% to $69.61 a barrel
- Spot gold fell 0.3% to $1,972.42 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson.
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