(Bloomberg) — US equity futures edged higher on Monday while Asian stocks faltered as investors assessed prospects of aggressive Federal Reserve interest-rate hikes to tackle the highest inflation in a generation.
S&P 500 and Nasdaq 100 contracts both added more than 0.1% after global shares completed a third straight advance last week in a rebound from bear-market lows.
European futures hinted at gains.
Retreating tech shares were among the drags on MSCI Inc.’s Asia-Pacific stock index. Covid lockdowns in a Chinese resort island also hit sentiment, while Hong Kong’s move to cut mandatory quarantine failed to ignite much optimism.
Strong US jobs data Friday added to the case for more Fed monetary tightening.
That’s pushed up Treasury yields and the dollar. A key part of the US bond curve is close to the most inverted level since 2000, suggesting investors foresee a recession ahead as the Fed applies the brakes on the economy.
Crude oil climbed but remained below $90 a barrel.
Gold struggled to make much progress. Bitcoin pushed above $23,500.
Traders now see greater odds of another 75 basis-point Fed hike in September, part of a global wave of rate increases. US inflation data this week could shape views on that policy path and inject more market swings.
While price pressures may be topping out, it’s unclear if they will persist a stubbornly high levels.
If investor projections for a peak in the fed funds rate top 4% following the inflation data, we could see “risk rolling over, with volatility rising, defensives outperforming, and better shorting opportunities” kicking in, Chris Weston, Pepperstone Group Ltd.
head of research, wrote in a note.
The latest comments from Fed officials left a question mark over wagers on a policy pivot toward reducing borrowing costs next year.
‘Far From Done’
San Francisco Fed President Mary Daly said the US central bank is “far from done yet” in bringing down price pressures.
Governor Michelle Bowman said the Fed should keep considering large hikes similar to the 75 basis-point increase approved last month until inflation meaningfully declines.
The July US payrolls report is “likely to enhance the Fed’s inclination to front-load interest rate hikes until the policy rate overshoots neutral by a good margin over the next few months,” TD Securities strategists including Priya Misra wrote in a note.
Elsewhere, the US Senate passed a landmark tax, climate and health-care bill, speeding a slimmed-down version of President Joe Biden’s domestic agenda on a path to becoming law.
US-China tension over Taiwan remains elevated.
China’s military announced a new exercise near the self-ruled island in the fallout from US House Speaker Nancy Pelosi’s visit.
What to watch this week:
- Iran nuclear deal talks, Monday
- US CPI data, Wednesday
- China CPI, PPI Wednesday
- Chicago Fed President Charles Evans, Minneapolis Fed President Neel Kashkari due to speak, Wednesday
- US PPI, initial jobless claims, Thursday
- San Francisco Fed President Mary Daly is interviewed on Bloomberg Television, Thursday
- Euro-area industrial production, Friday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 rose 0.1% as of 7:49 a.m.
London time
- Futures on the Nasdaq 100 rose 0.2%
- Futures on the Dow Jones Industrial Average rose 0.1%
- The MSCI Asia Pacific Index fell 0.3%
- The MSCI Emerging Markets Index fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0175
- The Japanese yen fell 0.3% to 135.35 per dollar
- The offshore yuan was little changed at 6.7699 per dollar
- The British pound was little changed at $1.2075
Bonds
- The yield on 10-year Treasuries declined one basis point to 2.81%
- Germany’s 10-year yield declined four basis points to 0.92%
- Britain’s 10-year yield advanced 16 basis points to 2.05%
Commodities
- Brent crude rose 0.8% to $95.70 a barrel
- Spot gold was little changed
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