(Bloomberg) — Most Asian stocks climbed and U.S. equity futures stabilized Monday amid a hiatus in the intense market volatility sparked by speculation about aggressive Federal Reserve interest-rate hikes to fight inflation.
An Asia-Pacific share gauge rose for a second day, though a clutch of markets, including China, are closed for the Lunar New Year holiday. Technology equities boosted Hong Kong, which is operating a shortened session. European contracts pushed higher and U.S. ones came off intraday lows.
The dollar was little changed and the yen fell. Treasuries slid and the yield curve flattened. Bond investors are braced for more swings as the Fed and other central banks curb pandemic-era stimulus.
Meanwhile, crude oil climbed, in part on the risk that any Russian invasion of Ukraine could roil energy flows. Gold continued to struggle. Bitcoin retreated to around $37,000, nursing a drop of some 20% since the start of 2022.
Strategists have begun to argue that global stocks are due a steadier period, even if temporarily, after shedding over 6% in January. In the futures market, for instance, some speculative S&P 500 bets are the most bullish since 2018.
The equity selloff “marks a long overdue correction rather than the start of a bear market,” BCA Research Inc. analysts including Peter Berezin and Melanie Kermadjian wrote in a note. “Stocks often suffer a period of indigestion when bond yields rise suddenly, but usually bounce back as long as yields do not move into economically restrictive territory,” they added.
Monetary-policy decisions from the European Central Bank and Bank of England will help shape the market mood in the days ahead, as will profit reports from the likes of Alphabet Inc. and Meta Platforms Inc.
Hiking Trail
The Fed’s hawkish pivot to fight inflation and an uneven company earnings season have stoked intense market volatility this month.
Fed Atlanta branch president Raphael Bostic told the Financial Times that a 50 basis-point rate increase, or hikes at each policy meeting this year, are options to fight inflation. But he said three quarter-point moves starting March are the most likely 2022 outcome. Bostic doesn’t vote on policy this year.
Goldman Sachs Group Inc.’s economists now predict the Fed will lift its near zero benchmark by 25 basis points five times this year rather than on four occasions. That would take it to 1.25%-1.5% by the end of the year.
In China, the economy continued to slow at the start of the year, with manufacturing output slipping and Covid outbreaks hitting consumer spending.
For more market analysis, read our MLIV blog.
What to watch this week:
- Earnings are due from Alphabet, Amazon, Exxon Mobil, Ford Motor, Meta Platforms, Qualcomm, Sony, Spotify, UBS Group
- Euro zone GDP growth data, Monday
- San Francisco Fed President Mary Daly due to speak at event, Monday
- Reserve Bank of Australia rate decision, Tuesday
- Manufacturing PMIs, including euro zone, Tuesday
- OPEC+ meeting on output, Wednesday
- Euro zone CPI, Wednesday
- Bank of England, European Central Bank rate decisions, Thursday
- Fed Board of Governors confirmation hearing, Thursday
- U.S. factory orders, initial jobless claims, durable goods, Thursday
- U.S. payrolls report for January, Friday
- Winter Olympics kick off in China, Russia’s President Vladimir Putin due to attend opening ceremony, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were flat as of 11:49 a.m. in Tokyo. The S&P 500 rose 2.4%
- Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 3.2%
- Japan’s Topix index rose 0.9%
- Australia’s S&P/ASX 200 index fell 0.3%
- Hong Kong’s Hang Seng index climbed 0.8%
- Euro Stoxx 50 futures rose 1.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was at $1.1157
- The Japanese yen was at 115.57 per dollar, down 0.3%
- The offshore yuan was at 6.3713 per dollar
Bonds
- The yield on 10-year Treasuries rose two basis points to 1.79%
- Australia’s 10-year bond yield fell one basis point to 1.93%
Commodities
- West Texas Intermediate crude rose 1.4% to $88.02 a barrel
- Gold was at $1,788.16 an ounce, down 0.2%
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