Shares opened the week lower amid intensifying concern over the impact of tightening monetary policy after strong labor market data reinforced expectations for more aggressive interest rate hikes from the Federal Reserve.
(Bloomberg) — Shares opened the week lower amid intensifying concern over the impact of tightening monetary policy after strong labor market data reinforced expectations for more aggressive interest rate hikes from the Federal Reserve.
Asian equities slumped, led by tech stocks in Hong Kong, while US futures also slid.
Chinese investors returned from a week-long break, just after the US expanded restrictions on access to semiconductor technology, and as Covid cases rebounded ahead of a Congress that’s set to give Xi Jinping a third term.
Bond yields climbed in Australia and New Zealand, following gains in US Treasury yields on Friday after the labor figures solidified wagers that the Fed will raise rates by 75 basis points for a fourth straight time next month.
Almost 95% of the companies in the S&P 500 fell and the Nasdaq 100 sank nearly 4%.
The dollar fluctuated versus its Group-of-10 counterparts as investors weighed the campaign by central banks to quell inflation with higher borrowing costs.
China set its reference rate for the yuan stronger than expected for a 28th day.
Fed Bank of New York President John Williams said rates need to rise to around 4.5% over time, but the pace and ultimate peak of the tightening campaign will hinge on how the economy performs.
Several officials recently delivered a resolutely hawkish message that price pressures remain elevated and they won’t be deterred from raising rates by volatility in financial markets.
All eyes will now be on this week’s US inflation data after a hotter-than-expected reading in August tempered hopes of a nascent slowdown.
Separately, minutes from the Fed’s September meeting will give clues into the central bank’s tolerance for economic pain.
“US CPI is the marquee event risk and when we see expectations that core CPI will rise 20 basis points to 6.5% from 6.3%, it will give the Fed even more fodder to keep tightening financial conditions,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note.
“The short sellers are having it all their way – we have no central bank support.”
Markets are closed for a holiday in Japan. The US bond market is closed but the stock market will be open.
Key events this week:
- Earnings this week include: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, BlackRock, Delta Air Lines, Fast Retailing, Infosys, PepsiCo, TSMC, Tata Consultancy, UnitedHealth, U.S.
Bancorp, Walgreens Boots, Wells Fargo, Wipro
- Fed’s Lael Brainard and Charles Evans speak, Monday
- IMF’s World Economic Outlook and Global Financial Stability Report, Tuesday
- Fed’s Loretta Mester speaks, Tuesday
- BOE’s Andrew Bailey speaks, Tuesday
- FOMC minutes for September meeting, Wednesday
- US PPI, mortgage applications, Wednesday
- OPEC Monthly Oil Market Report, Wednesday
- Fed’s Michelle Bowman and Neel Kashkari speak
- ECB’s Christine Lagarde speaks
- US CPI, initial jobless claims, Thursday
- G-20 finance ministers and central bankers meet, Thursday
- China CPI, PPI, trade, Friday
- US retail sales, business inventories, University of Michigan consumer sentiment, Friday
- BOE emergency bond buying is set to end, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 fell 0.3% as of 10:57 a.m.
Tokyo time. The S&P 500 fell 2.8% on Friday
- Futures on the Nasdaq 100 fell 0.3%. The Nasdaq 100 fell 3.9% on Friday.
- The S&P ASX Index fell 1.5%
- The Hang Seng Index fell 2%
- The Shanghai Composite Index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $0.9749
- The Japanese yen was little changed at 145.37 per dollar
- The offshore yuan rose 0.2% to 7.1186 per dollar
- The British pound rose 0.2% to $1.1105
Cryptocurrencies
- Bitcoin rose 0.1% to $19,510.05
- Ether rose 0.8% to $1,331.97
Bonds
- The US 10-year Treasury yield increased 6 basis points to 3.88% on Friday
- Australia’s 10-year yield advanced four basis points to 3.88%
Commodities
- West Texas Intermediate crude fell 0.6% to $92.05 a barrel
- Spot gold was little changed
(An earlier version of this story was corrected to show the US bond market is closed but the stock market will be open.)
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