Asian stocks fell and US Treasuries crept lower as investors weighed the Federal Reserve’s higher-for-longer stance. Oil gained for a second day.
Shares dropped in Australia, South Korea and China, dragging down a region-wide equity gauge for the fifth time in six days. Japanese equities and US stock futures both gained. Oil climbed as hedge funds piled on bets tightening supplies will see a resumption of the rally after a pause last week.
Stock losses in Asia followed a 0.2% decline for the S&P 500 on Friday to cap its worst week since March. Nasdaq 100 futures climbed 0.2% Monday after the underlying gauge ended little changed Friday, supported by gains in Apple Inc. as its latest iPhones and watches went on sale.
China stocks dropped in early trade despite a rally in US-listed Chinese companies on Friday, bolstered by news Washington and Beijing were forming working groups to discuss economic and financial issues. Investors also digested news on Friday that distressed developer China Evergrande Group had canceled a creditor meeting slated to begin Monday.
Treasuries will be in focus this week, with a number of Fed officials speaking at public events. Investors will also be watching the release of monthly inflation data in the US, and assessing the likely impact of a possible US government shutdown.
“Sentiment still remains fragile with higher-for-longer messages reverberating through the markets,” Redmond Wong, market strategist for Saxo Capital Markets HK Ltd, wrote in a research note. A potential US government shutdown and the United Auto Workers strike “could further dent sentiment this week,” he said.
The dollar traded in a narrow range against its major peers, while yen was little changed near its weakest level this year. Japan’s currency slipped last week as the Bank of Japan maintained its ultra-easy monetary policy settings.
Inflation Fears
Traders are still very concerned about inflation and the path of policy amid the recent oil rally and the Fed’s signal that rates are not going to come down any time soon, according to Fawad Razaqzada, a market analyst at City Index and Forex.com in London.
“It is far too early to say the markets have bottomed, as fundamentally nothing has changed,” Razaqzada said.
Two Fed officials said at least one more rate hike is possible and that borrowing costs may need to stay higher for longer for the central bank to ease inflation back to its 2% target. While Boston Fed President Susan Collins said further tightening “is certainly not off the table,” Governor Michelle Bowman signaled that more than one increase will probably be required.
The Treasury 10-year yield may rise to 4.75% before softer risk sentiment and tighter financial conditions push it lower into year-end, according to strategists at Bank of America Corp.
Elsewhere in markets, Bitcoin declined more than 1%, while gold was little changed.
Key events this week:
- Minneapolis Fed President Neel Kashkari in Q&A, Monday
- ECB’s Francois Villeroy de Galhau speaks on monetary policy, Monday
- US new home sales, Conference Board consumer confidence, Tuesday
- ECB’s Philip Lane speaks on monetary policy, Tuesday
- China industrial profits, Wednesday
- US durable goods, Wednesday
- Eurozone economic confidence, consumer confidence, Thursday
- US initial jobless claims, GDP, Thursday
- Fed Chair Jerome Powell town hall meeting with educators while Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee make speeches, Thursday
- Eurozone CPI, Friday
- Japan unemployment, industrial production, retail sales, Tokyo CPI, Friday
- US consumer spending, wholesale inventories, University of Michigan consumer sentiment, Friday
- ECB President Christine Lagarde speaks, Friday
- New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.2% as of 10:39 a.m. Tokyo time. The S&P 500 fell 0.2% Friday
- Nasdaq 100 futures rose 0.3%. The Nasdaq 100 fell 0.1% Friday
- Japan’s Topix rose 0.5%
- Australia’s S&P/ASX 200 fell 0.3%
- Hong Kong’s Hang Seng fell 0.6%
- The Shanghai Composite fell 0.2%
- Euro Stoxx 50 futures fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0649
- The Japanese yen was little changed at 148.39 per dollar
- The offshore yuan was little changed at 7.2994 per dollar
Cryptocurrencies
- Bitcoin fell 0.9% to $26,273.05
- Ether fell 0.5% to $1,582.6
Bonds
- The yield on 10-year Treasuries advanced two basis points to 4.45%
- Japan’s 10-year yield declined one basis point to 0.735%
- Australia’s 10-year yield declined three basis points to 4.30%
Commodities
- West Texas Intermediate crude rose 0.4% to $90.38 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Rita Nazareth and Brett Miller.
