US futures dip, stocks mixed on Fed, China caution: markets wrap
US equity futures fell and Asian stocks were mixed on Monday, hampered by the challenges swirling around China and a reminder from Federal Reserve officials that their key objective is to fight high inflation.
S&P 500 and Nasdaq 100 contracts were in the red, while declines in China and Hong Kong restrained MSCI’s Asia-Pacific share index. Global equities just posted their best month since 2020 but remain 15% lower this year.
Recent data and developments underlined the economic and regulatory challenges facing China, including a surprise contraction in factory activity that illustrated the cost of Beijing’s preference for mobility curbs to tackle Covid.
China’s e-commerce titan Alibaba Group slid after being added to a list of firms facing US delisting for failing to provide American officials with access to audits. That sapped a Hong Kong gauge of Chinese tech firms.
Meanwhile, Fed Bank of Minneapolis President Neel Kashkari said on Sunday the central bank is committed to reaching its long-term inflation goal of 2%. Before that, Fed Bank of Atlanta president Raphael Bostic said the monetary authority has further to go in raising borrowing costs.
Treasuries slipped, leaving the 10-year yield at 2.66%, well down from June’s peak near 3.50%. The yen jumped for a fourth session as the dollar gauge weakened. Oil, gold and Bitcoin all retreated.
A slowing economy has cooled expectations for the scale of the Fed interest-rate hikes needed to tame high inflation, spurring a July rebound in both stocks and bonds. But officials may be wary of market rallies that loosen financial conditions and thus imperil the goal of curbing demand to fight price pressures.
“Markets want to trade the ‘peak rates’ narrative, which has given risky assets some breathing room,” wrote Eric Robertsen, chief strategist at Standard Chartered Bank. He expects some “short-covering of underweight risk exposure” in August but warned that investors have to digest a lot of data, including inflation readings, before the next Fed meeting in September.
Elsewhere, investors are monitoring US House Speaker Nancy Pelosi’s trip to Asia. A statement from her office skipped any mention of a possible stopover in Taiwan. A visit may stoke US-China tension over the island.
What to watch this week:
- Airbnb, Alibaba, BP and HSBC are among earnings reports
- PMIs from the US and euro area, among others, Monday.
- US construction spending, ISM manufacturing, Monday.
- Reserve Bank of Australia rate decision, Tuesday.
- US JOLTS job openings, Tuesday.
- Chicago Fed president Charles Evans, St Louis Fed president James Bullard due to speak at separate events, Tuesday.
- OPEC+ meeting on output, Wednesday.
- US factory orders, durable goods, ISM services, Wednesday.
- BOE rate decision, Thursday.
- US initial jobless claims, trade, Thursday.
- Cleveland Fed president Loretta Mester due to speak, Thursday.
- US employment report for July, Friday.
Some of the main moves in markets:
- S&P 500 futures fell 0.3% as of 10:59 a.m. in Tokyo. The S&P 500 rose 1.4% on Friday
- Nasdaq 100 futures dropped 0.3%. The Nasdaq 100 rose 1.8% on Friday
- Japan’s Topix index climbed 0.5%
- South Korea’s Kospi was rose 0.4%
- Australia’s S&P/ASX 200 index increased 0.4%
- China’s Shanghai Composite index fell 0.2%
- Hong Kong’s Hang Seng index lost 0.7%
- Euro Stoxx 50 futures were up 0.2%
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was at $1.0233, up 0.1%
- The Japanese yen was at 132.44 per dollar, up 0.6%
- The offshore yuan was at 6.7562 per dollar, down 0.1%
- The yield on 10-year Treasuries rose one basis point to 2.66%
- West Texas Intermediate crude was at $97.55 a barrel, down 1.1%
- Gold was at $1,764.10 an ounce, down 0.1%. BM