US stock futures declined and the dollar traded in tight ranges versus major peers as investors weighed signs of progress in talks to avert a debt default and persistent inflationary pressure.
(Bloomberg) — US stock futures declined and the dollar traded in tight ranges versus major peers as investors weighed signs of progress in talks to avert a debt default and persistent inflationary pressure.
Much of the action early Monday was in emerging-markets currencies. The baht climbed as pro-democracy parties won a resounding victory in Thai elections, the rand rallied after South Africa moved to ease tensions with the US and investors awaited trading in the lira with Turkey’s presidential race hanging in the balance.
The picture for Asian stocks was mixed, with Japanese shares opening higher while benchmarks in Australia and South Korea slid and futures for Hong Kong fell.
That followed stocks and bonds floundering on Wall Street on Friday as investors lost faith that a pause in the Federal Reserve’s interest-rate hiking cycle was a given. The S&P 500 ended the week down 0.3% while the Nasdaq 100 eked out a 0.6% advance.
Inflation concerns persist, with a preliminary University of Michigan sentiment survey showing consumers expect prices to rise at a 3.2% annual rate over the next five to 10 years, a 12-year high.
It’s a very different situation in China, where price pressures have been in retreat, raising speculation that the central bank may ease monetary policy. Bloomberg Economics projects a 10 basis points cut in the medium-term lending facility rate Monday while other analysts expect it to remain at 2.75%.
Meanwhile, progress in US debt-ceiling talks hasn’t removed the risk of a failure to reach a compromise. Treasury Secretary Janet Yellen has warned that the department could run out of money as soon as June 1, or in the weeks after that. President Joe Biden and House Speaker Kevin McCarthy plan to meet Tuesday for more discussions.
Hawkish comments from Fed officials have added to unease among investors. Inflation is still too high, Chicago Fed President Austan Goolsbee said in PBS interview. “You don’t want to land the plane nose down. So we’re trying to balance off — can we slow the inflation without sending it into a recession.”
Goolsbee’s comments followed those of Fed Governor Michelle Bowman who said the central bank will likely need to raise interest rates further if price pressures don’t cool.
Yields on the policy-sensitive two-year Treasuries were unchanged early Monday after climbing to 3.99% on Friday. Yields on Australian and New Zealand government debt were higher Monday.
An index of dollar strength was steady after notching its biggest weekly gain since February as investors embraced its safe haven status. Bitcoin remained below $27,000.
Billionaire Gautam Adani’s empire continues to draw attention in markets, with companies including his flagship firm seeking to raise as much as $2.6 billion after a scathing short seller report forced it into damage control.
Elsewhere in markets, oil held a fourth weekly loss as the outlook for demand is damped by worries over the US economy and China’s slower-than-expected recovery.
Key events this week:
- China one-year medium-term lending facility rate, Monday
- Eurozone industrial production, Monday
- US cross-border investment, New York Fed Empire Manufacturing, Monday
- Atlanta Fed’s Raphael Bostic speaks at his bank’s annual financial markets conference, Monday
- China retail sales, industrial production, Tuesday
- US retail sales, industrial production, business inventories, Tuesday
- Fed speakers include Cleveland’s Loretta Mester, New York’s John Williams, Atlanta’s Raphael Bostic and Chicago’s Austan Goolsbee, Tuesday
- Japan GDP, Wednesday
- Eurozone CPI, Wednesday
- US housing starts, Wednesday
- BOE Governor Andrew Bailey speaks at the British Chamber of Commerce, Wednesday
- US initial jobless claims, Conference Board leading index, existing home sales, Thursday
- Japan CPI, Friday
- ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday
- New York Fed’s John Williams speaks at monetary policy research conference in Washington, and Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.2% as of 8:11 a.m. Tokyo time. The S&P 500 fell 0.2% Friday
- Nasdaq 100 futures fell 0.2%. The Nasdaq 100 fell 0.4%
- Japan’s Topix rose 0.5%
- Australia’s S&P/ASX 200 fell 0.1%
- Hang Seng Index futures fell 0.9%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0853
- The Japanese yen was little changed at 135.82 per dollar
- The offshore yuan was little changed at 6.9716 per dollar
- The Australian dollar was little changed at $0.6643
Cryptocurrencies
- Bitcoin fell 0.1% to $26,914.94
- Ether was little changed at $1,798.41
Bonds
- The yield on 10-year Treasuries was little changed at 3.47%
- Australia’s 10-year yield advanced six basis points to 3.38%
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 Peyton Forte.
(An earlier version of this wrap was corrected in the pricing section to show Hong Kong futures fell)
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