Equity futures point to Asian stock markets opening little changed Tuesday as investors weigh weak factory data against inflation concerns fueled by OPEC+’s surprise plan to cut oil output.
(Bloomberg) — Equity futures point to Asian stock markets opening little changed Tuesday as investors weigh weak factory data against inflation concerns fueled by OPEC+’s surprise plan to cut oil output.
Contracts for Japan fell marginally while those for Australia and Hong Kong suggested little change. Futures for US benchmarks dropped fractionally as they opened in Asia following a mixed session on Wall Street.
Much of the action in the US was in the debt market, with gains in Treasuries after a gauge of factory activity contracted by more than expected. That came after China’s manufacturing activity unexpectedly eased in March.
While such data is tempering inflation concerns despite expected energy hikes after the cartel’s production cut, it also shows the darkening economic outlook is spreading to Asia.
Fed Bank of St. Louis President James Bullard told Bloomberg Television Monday that OPEC+’s decision was unexpected and an increase in oil prices could make the Fed’s job of lowering inflation more challenging. “Whether it will have a lasting impact I think is an open question,” he said.
The Institute for Supply Management’s gauge of US manufacturing activity decreased to 46.3 in March, below the median estimate of 47.5 in a Bloomberg survey of economists. Readings below 50 indicate contraction. Measures of new orders and employment retreated.
As the possibility of a recession looks more certain, the upcoming earnings season may be the first of several difficult quarters, according to Chris Harvey, head of equity strategy at Wells Fargo & Co.
“We have been seeing for a number of quarters, margins starting to compress, and we think this is where it comes to roost,” Harvey said on Bloomberg Television. “This is the period where if you can’t make numbers, if margins get compressed, this is where you get penalized.”
JPMorgan Chase & Co. strategist Marko Kolanovic reiterated the bank’s underweight call on equities in a note to clients, warning that “stocks are set to weaken for the remainder of the year” as headwinds from banking turbulence, oil shocks, and slowing growth linger.
Energy shares led gains in S&P 500 Monday, with US crude rallying the most in more than a year hitting $80 a barrel. The Nasdaq 100 underperformed major benchmarks as Tesla Inc. sank on data showing its price cuts barely boosted deliveries. Policy-sensitive two-year yields reversed course after earlier climbing as much as 11 basis points.
Looking to the Asian trading session, investors will will have a focus on Australia. Economists are divided over whether the central bank there will raise interest rates for an 11th consecutive meeting or pause its most aggressive tightening cycle since 1989 amid cooling economic momentum.
Further into the week, the US government’s monthly employment report will be released Friday and will give a fuller picture of the job market. Swaps linked to Fed interest-rate expectations showed a quarter-point hike in May as more likely than not.
Key events this week:
- Eurozone PPI, Tuesday
- US factory orders, US durable goods, Tuesday
- Australia rate decision, Tuesday
- Cleveland Fed President Loretta Mester speaks, Tuesday
- Eurozone S&P Global Eurozone Services PMI, Wednesday
- US trade, Wednesday
- UBS annual general meeting, Wednesday
- US initial jobless claims, Thursday
- St. Louis Fed President James Bullard speaks, Thursday
- US unemployment, nonfarm payrolls, Friday
- Good Friday. US stock markets closed, bond markets close for part of the day
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 7:12 a.m. Tokyo time. The S&P 500 rose 0.4%
- Nasdaq 100 futures fell 0.1%. The Nasdaq 100 fell 0.3%
- Nikkei 225 futures fell 0.1%
- Australia’s S&P/ASX 200 Index futures were little changed
- Hang Seng Index futures were little changed
Currencies
- The euro was little changed at $1.0905
- The Japanese yen was little changed at 132.34 per dollar
- The offshore yuan was little changed at 6.8733 per dollar
- The Australian dollar was little changed at $0.6785
Cryptocurrencies
- Bitcoin rose 0.7% to $27,768.87
- Ether rose 1.1% to $1,800.1
Bonds
- The yield on 10-year Treasuries declined six basis points to 3.41%
Commodities
- West Texas Intermediate crude was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth.
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