US stock futures declined Monday and Treasury yields rose as a cautious tone from a Fed speaker tempered some of the ebullience that inflation may have peaked.
(Bloomberg) — US stock futures declined Monday and Treasury yields rose as a cautious tone from a Fed speaker tempered some of the ebullience that inflation may have peaked.
Contracts on the tech-heavy Nasdaq 100, typically more sensitive to interest rates, slipped 0.6% while those on the S&P 500 dropped 0.4%. Losses in New York premarket trading were concentrated in tech names, with Tesla Inc., chipmakers Nvidia Corp., Intel Corp. and Micron Technology Inc. shedding as much as 1.5%. Europe’s Stoxx 600 benchmark rose to a near three-month high, and Chinese shares rallied for a second day on hopes the country’s Covid zero isolation would soon end.
The dollar turned higher after weekend comments from Federal Reserve Governor Christopher Waller that policymakers had “a ways to go” before ending interest-rate hikes. His comments also helped lift 10-year Treasury yields by 9 basis points.
While 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, some of the world’s largest money managers are clinging to risk-off positioning against the threat of entrenched inflation. 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
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. The dollar climbed 0.6% against a basket of currencies after losing almost 4% this month.
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.
Meanwhile, Chinese developers’ stocks and bonds soared, driven by Beijing’s property rescue measures and as easing Covid controls raise hopes that the worst may be over. Real estate firm Country Garden rose as much as 46% in Hong Kong, while the offshore-traded yuan strengthened 1% versus the dollar at one point.
“There are still a lot of risks but it seems like some of the tail risk has been clipped,” Stephen Chang, managing director and portfolio manager at Pimco Asia Ltd., said in an interview with Bloomberg TV.
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.
Cryptocurrencies swung higher on plans by Binance Holdings Ltd. to set up a recovery fund to stabilize the industry after FTX’s bankruptcy sparked market-wide losses of around $200 billion in the past week.
Oil dipped after a two-day rally, as a stronger dollar offset optimism around the outlook for improved Chinese demand.
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
- Futures on the S&P 500 fell 0.4% as of 7:16 a.m. New York time
- Futures on the Nasdaq 100 fell 0.6%
- Futures on the Dow Jones Industrial Average fell 0.2%
- The Stoxx Europe 600 rose 0.2%
- The MSCI World index fell 0.1%
Currencies
- The Bloomberg Dollar Spot Index rose 0.6%
- The euro fell 0.7% to $1.0277
- The British pound fell 0.6% to $1.1758
- The Japanese yen fell 1.3% to 140.57 per dollar
Cryptocurrencies
- Bitcoin rose 1.9% to $16,676.09
- Ether rose 2.9% to $1,252.05
Bonds
- The yield on 10-year Treasuries advanced nine basis points to 3.90%
- Germany’s 10-year yield declined three basis points to 2.13%
- Britain’s 10-year yield declined six basis points to 3.30%
Commodities
- West Texas Intermediate crude fell 1.4% to $87.73 a barrel
- Gold futures fell 0.6% to $1,759.40 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
