Equity futures struggled for direction at the start of the week as a cautious tone from a Fed speaker tempered ebullience that inflation may have peaked.
(Bloomberg) — Equity futures struggled for direction at the start of the week as a cautious tone from a Fed speaker tempered ebullience that inflation may have peaked.
US stock futures declined Monday while a European benchmark ticked higher, lifted by miners and automakers. Contracts on the S&P 500 fell 0.2% while those on the Nasdaq 100 slipped 0.4%. Asian equities erased earlier gains, dragged down by Japanese shares.
Treasury yields advance and the dollar flipped to a gain after weekend comments from Federal Reserve Governor Christopher Waller that policymakers had “a ways to go” before ending interest-rate hikes.
Some of the world’s largest money managers are clinging to risk-off positioning against the threat of entrenched inflation, even if price pressures ebb. JPMorgan Asset Management has a record allocation in cash in at least one of its strategies while a hedge fund solutions team at UBS Group AG is staying defensive.
“Markets have been reading too much into one data print, US inflation has slowed but it’s not slow,” said Salman Ahmed, chief investment strategist at Fidelity International. “The Fed will need more data to reassess the end point for rates.”
Read more: Wall Street Managers Are Pushing Back on Easing Inflation Hopes
Signs of cooling in US inflation and the prospects of a dovish tilt by the Fed had propelled the S&P 500 to its best week since June and sapped dollar strength. The University of Michigan’s preliminary November survey on Friday showed US consumer inflation expectations increased in the short and long run while sentiment retreated.
To be sure, while Waller said the hiking cycle would continue for some time, he noted that the Fed could start considering a downshift to a 50 basis-point move at the next meeting in December or the one after that.
Investors will also keep a wary eye on the Group of 20 summit in Indonesia, where US President Joe Biden and Chinese leader Xi are expected to meet. Biden’s hand has been strengthened by the Democrats defying political forecasts and historical trends to keep control of the Senate.
Chinese developers’ shares and dollar bonds extended a rally Monday, driven by Beijing’s property rescue measures and as easing Covid controls raise hopes that the worst may be over.
Cryptocurrencies fluctuated while the sector remained under pressure amid FTX’s deepening woes. A swift plunge in the value of FTX’s key crypto assets and unauthorized withdrawals of funds after it filed for bankruptcy suggest customers have little chance of recovering much of their deposits.
Oil dipped after a two-day rally as a stronger dollar offset optimism around the outlook for improved Chinese demand. Gold declined.
Key events this week:
- US President Joe Biden plans to meet Chinese President Xi Jinping on the sidelines of the G-20, Monday
- Fed’s John Williams moderates panel, Monday
- China retail sales, industrial production, surveyed jobless, Tuesday
- Former US President Donald Trump plans to make an announcement, Tuesday
- US empire manufacturing, PPI, Tuesday
- US business inventories, cross-border investment, retail sales, industrial production, Wednesday
- Fed’s John Williams, Lael Brainard and SEC Chair Gary Gensler speak, Wednesday
- ECB President Christine Lagarde speaks, Wednesday
- Eurozone CPI, Thursday
- US housing starts, initial jobless claims, Thursday
- Fed’s Neel Kashkari, Loretta Mester speak, Thursday
- US Conference Board leading index, existing home sales, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.4% as of 8:21 a.m. London time
- Futures on the S&P 500 fell 0.2%
- Futures on the Nasdaq 100 fell 0.4%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index rose 0.1%
- The MSCI Emerging Markets Index rose 0.6%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was little changed at $1.0345
- The Japanese yen fell 0.5% to 139.46 per dollar
- The offshore yuan rose 0.9% to 7.0285 per dollar
- The British pound fell 0.2% to $1.1812
Cryptocurrencies
- Bitcoin rose 2.8% to $16,831.24
- Ether rose 4% to $1,265.21
Bonds
- The yield on 10-year Treasuries advanced seven basis points to 3.89%
- Germany’s 10-year yield was little changed at 2.17%
- Britain’s 10-year yield advanced one basis point to 3.37%
Commodities
- Brent crude rose 0.4% to $96.41 a barrel
- Spot gold fell 0.4% to $1,764.40 an ounce
This story was produced with the assistance of Bloomberg Automation.
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