Stocks dip, dollar rises as Fed path stirs caution: markets wrap
An Asian stock index dipped and the dollar climbed on Wednesday as investors assessed the likely pace of Federal Reserve monetary tightening and mounting signs of an economic slowdown.
Bourses in Japan and Hong Kong fell while China was mixed. US futures retreated after the S&P 500 and Nasdaq 100 posted small losses.
A dollar gauge pushed higher and risk-sensitive currencies such as those in Australia and New Zealand slid. Treasuries were little changed, leaving the US 10-year rate above 3%.
The latest data showed economic activity weakening from the US to Europe and Asia, underlining the delicate task the Fed faces in hiking interest rates to bring down high inflation without sparking a recession.
Investors will pour over Fed chair Jerome Powell’s speech at the Jackson Hole symposium on Friday for a sense of how hawkish the US central bank will be in the face of mounting economic challenges. A global rebound in equities from a June low has stalled ahead of the much-anticipated event.
“Globally we haven’t seen a deceleration like this that has been so synchronised in many decades,” Frances Stacy, director of strategy at Optimal Capital Advisors LLC, said on Bloomberg Television. “I don’t want to be directional” in picking trades, she added.
Goldman Sachs Group chief economist Jan Hatzius said he expects Powell to lay out a case for slower increases. Federal Reserve Bank of Minneapolis president Neel Kashkari said inflation is very high and the central bank must act to bring it under control.
In China, drought and power shortages are compounding challenges from a property crisis and Covid curbs.
Elsewhere, crude oil held gains near $94 a barrel, bolstered by shrinking US crude stockpiles and possible OPEC+ output cuts.
What to watch this week:
- US durable goods, MBA mortgage applications, pending home sales, Wednesday
- US GDP, initial jobless claims, Thursday
- Kansas City Fed hosts its annual economic policy symposium in Jackson Hole, Wyoming, Thursday
- ECB’s July minutes, Thursday
- Fed chair Powell speaks at Jackson Hole, Friday
- US personal income, PCE deflator, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
- S&P 500 futures dipped 0.3% as of 10:54 a.m. in Tokyo. The S&P 500 fell 0.2%
- Nasdaq 100 futures slipped 0.4%. The Nasdaq 100 was little changed
- Japan’s Topix index shed 0.3%
- Australia’s S&P/ASX 200 index rose 0.5%
- South Korea’s Kospi index lost 0.1%
- Hong Kong’s Hang Seng index fell 0.8%
- China’s Shanghai Composite index dropped 0.2%.
- The Bloomberg Dollar Spot Index climbed 0.2%
- The euro was at $0.9946, down 0.2%
- The Japanese yen traded at 136.86 per dollar, down 0.1%
- The offshore yuan was at 6.8677 per dollar, down 0.2%
- The yield on 10-year Treasuries was at 3.04%
- Australia’s 10-year yield increased five basis points to 3.63%
- West Texas Intermediate crude was at $93.44 a barrel, down 0.3%
- Gold was at $1,745.87 an ounce, down 0.1%