Stocks were mixed Tuesday as investors parsed comments from Federal Reserve officials on interest rate hikes and weighed the impact of Covid infections in China.
(Bloomberg) — Stocks were mixed Tuesday as investors parsed comments from Federal Reserve officials on interest rate hikes and weighed the impact of Covid infections in China.
A gauge of Asian equities came off its intraday highs as equities in Hong Kong slid with China’s daily virus infections climbing to near the highest on record. Covid-control restrictions now affect a fifth of China’s economy.
Japanese shares led gains in the region, supported by weakness in the yen, while the Australian market followed energy and materials companies higher. Contracts for European equities trimmed gains and those for the US fluctuated.
Fed officials have broadly maintained their steadfast stance to fight against inflation. Yet San Francisco Fed President Mary Daly also said that officials need to be mindful of the lags in the transmission of policy changes while her Cleveland counterpart Loretta Mester said she’s open to slowing the tempo of rate hikes.
The dollar weakened against all major currencies and Treasury yields declined.
“In a year like this, it is so difficult and often a fool’s errand to read too much into any one speech from one Federal Reserve official,” Sarah Ponczek, financial adviser at UBS Private Wealth Management, said on Bloomberg Television. “The reality is that we do expect that the Federal Reserve is still likely going to raise interest rates again in December.”
JPMorgan Chase & Co. strategist Marko Kolanovic, who until recently had been one of the most vocal bulls on Wall Street, said risky assets may languish until the Fed reverses course on its hawkish campaign to raise interest rates. A near-term pivot is likely not in the cards and JPMorgan expects assets to still be “rangebound with a more pronounced downside risk.”
Meanwhile, China reopening may only be a story for the second quarter of next year as the country is entering winter months, according to Dwyfor Evans, head of Asia Pacific macro strategy at State Street Global Markets.
“To actually expect a very conservative political body to suddenly open up China and remove restrictions in November and into the most dangerous season as it were for these type of pandemic instances, we always thought that was very, very optimistic,” Evans said on Bloomberg Television.
News of salary cuts at Chinese e-commerce firm JD.com also dragged down sentiment.
Oil steadied as investors assessed a clouded supply outlook and concerns over weaker demand in China. Gold rose on weaker dollar.
Cryptocurrency prices also steadied, in a lull from the selloff sparked by the demise of Sam Bankman-Fried’s FTX empire. Investors remain braced for more ructions as further digital-asset sector bankruptcies loom.
Key events this week:
- US Richmond Fed manufacturing index, Tuesday
- OECD releases Economic Outlook, Tuesday
- Fed’s Loretta Mester and James Bullard speak, Tuesday
- S&P Global PMIs: US, Euro area, UK, Wednesday
- US MBA mortgage applications, durable goods, initial jobless claims, University of Michigan sentiment, new home sales, Wednesday
- Minutes of the Federal Reserve’s Nov. 1-2 meeting, Wednesday
- ECB publishes account of its October policy meeting, Thursday
- US stock and bond markets are closed for the Thanksgiving holiday, Thursday
- US stock and bond markets close early, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 6:30 a.m. London time. The S&P 500 fell 0.4% Monday
- Nasdaq 100 futures were little changed. Nasdaq 100 fell 1.1%
- Euro Stoxx 50 futures rose 0.2%
- Japan’s Topix index rose 1.1%
- Hong Kong’s Hang Seng Index fell 1.9%
- China’s Shanghai Composite Index was little changed
- Australia’s S&P/ASX 200 Index rose 0.6%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.1% to $1.0256
- The Japanese yen rose 0.2% to 141.82 per dollar
- The offshore yuan rose 0.3% to 7.1591 per dollar
Cryptocurrencies
- Bitcoin rose 0.7% to $15,748.45
- Ether rose 0.2% to $1,095.74
Bonds
- The yield on 10-year Treasuries declined three basis points to 3.79%
- Australia’s 10-year yield was little changed at 3.59%
Commodities
- West Texas Intermediate crude rose 0.2% to $80.20 a barrel
- Spot gold rose 0.3% to $1,742.56 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tommi Utoslahti.
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