Futures, Stocks Drop in Fed Outlook; Dollar Earnings: Wrapping the Markets

(Bloomberg Opinion) — European and US stock futures fell, while stocks in Asia fell as an unexpectedly strong US jobs report raised the prospect of more rate hikes from the company. Federal Reserve. Concern over geopolitical tensions between the US and China also weighed on sentiment.

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The dollar rose for a third day after a gauge of its strength rose more than 1% on Friday, when data showed payrolls and unemployment rose to a 53-year low. This points to persistent inflation in the US and strengthens the case for further rate hikes. Shares in South Korea and Australia also fell.

Stocks fell in Hong Kong and mainland China, with the Hang Seng Index on track for its lowest close in a month. US-listed Chinese stocks fell on Friday after the Biden administration decided to postpone Secretary of State Antony Blinken’s upcoming trip to China in light of an alleged Chinese spy balloon, which was later shot down.

“The episode should come as a big surprise to investors given previous market expectation that the Sino-US relationship could improve after the now-cancelled Blinken visit,” said Willer Chen, a senior research analyst at Forsyth Barr Asia.

In Japan, stocks rose and the yen weakened after the Nikkei reported that the government had approached Bank of Japan Deputy Governor Masayoshi Amamiya to succeed Haruhiko Kuroda as central bank chief. While the Japanese government refuted the report, investors assume a greater likelihood that the current ultra-easy monetary policy will endure if one of its architects succeeds Kuroda.

“The chances of rejecting the current policy have become slim,” Toru Suehiro, chief economist at Daiwa Securities, said in a note. “While it is possible to remove yield curve control once bond market stabilization is confirmed, a clear rate hike move such as ending the negative rate seems unlikely.”

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Meanwhile, strong US jobs data on Friday “had serious implications for Fed policy; simply put, it confirms our long-standing belief that the Fed will have to hike higher for longer than the US bullish market scenarios had priced in,” Win Thin, global head of FX strategy at Brown Brothers Harriman, wrote in a note. “We still have a ways to go to get to the top fed funds rate, and yet people are still looking for second-half rate cuts in what would be an extremely rapid turnaround.”

Employment data propelled Treasury yields to extend gains for a second day, while Australian bonds fell. Traders will closely watch this week’s $96 billion worth of Treasury bond and note auctions, which will be a test for the market, according to Daniel Mulholland, director of rates at Crews & Associates.

The Turkish lira was little changed against the dollar in early trading. Turkey and neighboring Syria were hit by a powerful earthquake before dawn Monday, killing more than 110 people.

Elsewhere, oil stabilized as traders assessed the demand outlook in China and the latest sanctions on Russian energy flows came into effect. Golden Rose.

Adani Group assets face continued volatility this week. The group’s 10 shares fell at the open in India, deepening their selloffs. Flagship Adani Enterprises Ltd. has decided to shelve plans for its first public sale of bonds, according to people familiar with the matter. While the shares’ falls were less sharp on Friday than in previous days, the slide in shares has roughly halved the market value of the Indian group’s companies since Hindenburg Research’s allegations of manipulation and accounting fraud.

“Clearly it’s very important to the country because the operating business is so widespread,” Belita Ong, president of Dalton Investments, said on Bloomberg Television. “Our belief is that the government will take the necessary steps to stabilize the situation and make sure that the operating entities are functioning.”

Key events this week:

• This week’s earnings are scheduled to include: AP Moller-Maersk, Apollo Global Management, AstraZeneca, BNP Paribas, BP, CME Group, Duke Energy, KKR, Nintendo, PepsiCo, Semiconductor Manufacturing International, Siemens, SoftBank Group, Toyota Motor, Uber Technologies, Unilever, Walt Disney

• Eurozone retail sales, Monday

• Australia rate decision, Tuesday

• US trade, Tuesday

• Fed Chairman Jerome Powell at the Economic Club of Washington on Tuesday

• US President Joe Biden delivers the State of the Union address, Tuesday

• India rate decision Wednesday

• US Wholesale Inventories, Wednesday

• John Williams of the New York Fed at an event in New York

• Sweden rate decision Thursday

• Initial jobless claims in the US, Thursday

• ECB President Christine Lagarde takes part in the EU leaders’ summit on Thursday

• Bank of England Governor Andrew Bailey appears before the Treasury Committee on Thursday.

• China PPI, CPI, BoP, Friday

• US University of Michigan Consumer Sentiment, Friday

• Fed’s Christopher Waller and Patrick Harker speak Friday

Some of the main movements in the markets:

Stocks

• S&P 500 futures fell 0.4% as of 6:28 a.m. London time. The S&P 500 fell 1%

• Nasdaq 100 futures fell 0.4%. The Nasdaq 100 fell 1.8%

• Euro Stoxx 50 futures fell 0.7%

• Japan’s Topix Index rose 0.5%

• South Korea’s Kospi index fell 1.4%

• Hong Kong’s Hang Seng Index fell 2.3%

• China’s Shanghai Composite Index fell 1%

• India’s Nifty 50 index fell 0.6%

• Australia’s S&P/ASX 200 Index fell 0.3%

coins

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro was little changed at $1.0791

• The Japanese yen fell 0.5% to 131.83 per dollar

• The offshore yuan rose 0.2% to 6.7932 per dollar

• The British pound was little changed at $1.2064

CRYPTOCURRENCIES

• Bitcoin fell 0.5% to $22,780.47

• Ether rose 0.2% to $1,626.07

Captivity

• The 10-year Treasury yield rose three basis points to 3.55%.

• Japan’s 10-year bond yield held steady at 0.49%

• Australia’s 10-year bond yield rose eight basis points to 3.46%

raw Materials

• West Texas Intermediate crude rose 0.1% to $73.49 a barrel

• Spot gold rose 0.7% to $1,878.72 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Richard Henderson, Charlotte Yang, and Michael G. Wilson.

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