(Bloomberg) — An Asian stock gauge fell along with US equity futures Friday and the dollar was around a one-month high, reflecting caution about the likely pace of Federal Reserve interest-rate hikes to fight inflation.
(Bloomberg) — An Asian stock gauge fell along with US equity futures Friday and the dollar was around a one-month high, reflecting caution about the likely pace of Federal Reserve interest-rate hikes to fight inflation.
MSCI Inc.’s Asia-Pacific share index shed 0.4%, while S&P 500, Nasdaq 100 and European futures slipped. Wall Street shares posted a small advance Thursday.
A greenback gauge and Treasury yields advanced as investors parsed slightly divergent comments from Fed officials: St. Louis’s James Bullard urged another 75 basis-point move while Kansas City’s Esther George struck a more cautious tone, saying the case for hikes is strong but the pace is up for debate.
Geopolitical tension might also be in the mix for the dollar move. Indonesian President Joko Widodo said China’s Xi Jinping and Russia’s Vladimir Putin plan to be at a Group of 20 summit in Bali later this year. That sets up a showdown with US President Joe Biden and others as Russia continues its war in Ukraine.
Oil, gold and Bitcoin dropped. Later Friday, a $2 trillion options expiration could stir volatility in global markets.
Investor sentiment has been boosted over the last few weeks by expectations of slower monetary tightening on signs that high inflation is cooling.
But hurdles remain for the 12% jump in world equities from June lows, not least the risk of entrenched global price pressures alongside economic slowdowns in the US and China.
While “lower volatility both in fixed income and in equities is starting to pull people back into the market,” events such as the Fed’s annual symposium in Jackson Hole, Wyoming next week will help determine if that’s sustainable, Nicholas Colas, co-founder at DataTrek Research, said on Bloomberg Television.
Traders will pour over Fed Chair Jerome Powell’s comments at the symposium. There is already speculation he may lean against a recent loosening in financial conditions that makes it harder to curb the cost of living.
At some point in time, the Fed will acknowledge a very stark growth-inflation trade-off and will accept living with inflation, according to Ann-Katrin Petersen, senior investment strategist at BlackRock Investment Institute.
“This established pivot is not likely in the very near term in contrast to what markets seem to be expecting right now,” she said on Bloomberg Television. “But this dovish pivot may come in 2023 from my perspective.”
Separately, Indonesia’s president said the nation could impose a tax on nickel exports this year. Shares of Asian nickel producers pushed higher.
Inflation remains the most closely-watched indicator in the second half. Will it come down gradually, or will it stay elevated, forcing the Fed to keep raising rates aggressively? Have your say in the anonymous MLIV Pulse survey.
Some of the main moves in markets:
Stocks
- S&P 500 futures slipped 0.3% as of 7:19 a.m. in London. The S&P 500 rose 0.2%
- Nasdaq 100 futures declined 0.4%. The Nasdaq 100 rose 0.3%
- Japan’s Topix index was up 0.2%
- South Korea’s Kospi index lost 0.5%
- Hong Kong’s Hang Seng index climbed 0.3%
- China’s Shanghai Composite index lost 0.4%
- Australia’s S&P/ASX 200 index was little changed
- Euro Stoxx 50 futures slipped 0.5%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was at $1.0081, down 0.1%
- The Japanese yen was at 136.27 per dollar, down 0.3%
- The offshore yuan was at 6.8227 per dollar, down 0.3%
Bonds
- The yield on 10-year Treasuries rose three basis points to 2.92%
- Australia’s 10-year bond yield climbed eight basis points to 3.41%
Commodities
- West Texas Intermediate crude fell 0.6% to $89.97 a barrel
- Gold was at $1,755.23 an ounce, down 0.2%
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