The dollar weakened slightly against most major currencies and the yen advanced, boosted by a report that the Japanese prime minister may consider allowing more flexibility in the monetary regime that has kept the nation’s interest rates at rock-bottom levels.

Australian shares opened lower while equity futures for Japan and Hong Kong fell after the S&P 500 and the tech-heavy Nasdaq 100 closed lower for a third day on Friday. The quarterly triple witching expiration of equity derivatives amplified market moves.

The risk of higher interest rates pushing the US into recession in 2023 is casting a pall over trading that’s winding down into year end. Meanwhile, China’s pivot from Covid Zero raises the prospect of growth from economic reopening — along with the risk from a surge of new infections. The number of Covid-positive dead arriving at Beijing’s funeral parlours and crematoriums is increasing, according to media reports.

Government bond yields were little changed in Australia and New Zealand on Monday after US Treasuries were mixed on Friday, when short-term bonds rallied while the 10-year maturity fell. The policy-sensitive two-year Treasury yield ended the week 17 basis points lower than where it started.

Investors had cheered the softer-than-expected US inflation data but that euphoria faded as Fed officials hammered home the message that rates would go higher for longer until they’re confident inflation has been subdued. A wave of rate hikes and hawkish outlooks from central banks across the globe, including the European Central Bank, further bruised sentiment last week. 

Key events this week:

• China loan prime rates, Tuesday
• Bank of Japan interest rate decision, Tuesday
• US housing starts, Tuesday
• EIA Crude Oil Inventory Report, Wednesday
• US existing home sales, US Conference Board consumer confidence, Wednesday
• US GDP, initial jobless claims, US Conf. Board leading index, Thursday
• US consumer income, new home sales, US durable goods, PCE deflator, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.1% as of 8:10 a.m. in Tokyo. The S&P 500 fell 1.1% on Friday
• Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 0.9%
• Nikkei 225 futures fell 0.8%
• Australia’s S&P/ASX 200 Index fell 0.2%
• Hang Seng Index futures fell 0.1%

Currencies

• The euro was little changed at $1.0591
• The Japanese yen rose 0.2% to 136.27 per dollar
• The offshore yuan was little changed at 6.9829 per dollar
• The Australian dollar rose 0.1% to $0.6695

Cryptocurrencies

• Bitcoin rose 0.3% to $16,807.97
• Ether rose 0.9% to $1,192.7

Bonds

• The yield on 10-year Treasuries advanced four basis points to 3.48% on Friday
• Australia’s 10-year yield advanced one basis point to 3.46%

Commodities

• West Texas Intermediate crude rose 0.4% to $74.58 a barrel
• Gold futures rose 0.9% to $1,793.08 an ounce on Friday