Business Maverick

Business Maverick

US equity futures drop as baht gains with rand: markets wrap

US equity futures drop as baht gains with rand: markets wrap
Stock price information displayed in the lobby of the Euronext NV stock exchange in Paris, France, on Wednesday, 14 December 2022. (Photo: Nathan Laine/Bloomberg)

US stock futures fell in Asian trade while equities across the region were mixed as investors weighed down signs of progress in talks to avert a debt default and persistent inflationary pressure. 

Japanese shares gained, with the Topix index nearing the highest level since 1990. Benchmarks in Australia, South Korea, and mainland China all dropped and Hong Kong’s fluctuated. The dollar weakened versus most of its G10 peers, while Treasuries were little changed.

China kept its medium-term lending facility at 2.75%, as economists had forecast, while injecting more long-term liquidity into the financial system for the sixth month in a bid to bolster growth when multiple economic indicators revealed faltering recovery momentum. 

Political developments led to a busy morning for emerging markets. The Thai baht climbed as pro-democracy parties got the most votes in weekend elections, and the rand rallied after South Africa moved to ease tensions with the US. Investors awaited trading in the lira with Turkey’s presidential race hanging in the balance.

US inflation concerns ratcheted higher on Friday, with a preliminary University of Michigan sentiment survey showing five-year expectations for consumer-price gains jumped to a 12-year high. 

“There’s quite a fair bit of ongoing risk in the market,” Audrey Goh, senior cross asset strategist at Standard Chartered Wealth Management Group, said in an interview on Bloomberg Television. “The debt-ceiling talks are still in the making, at the same time we’ve also got inflation still quite elevated. There could be further downside from here where equity markets are concerned.”

Progress in US debt-ceiling talks hasn’t removed the risk of a failure to reach a compromise. Treasury Secretary Janet Yellen has said the department may run out of money as soon as June 1, or in the weeks after that. President Joe Biden and House Speaker Kevin McCarthy plan to meet Tuesday.

Hawkish Fed

Hawkish comments from Fed officials have added to unease among investors. Inflation is still too high, Chicago Fed President Austan Goolsbee said in a PBS interview. “You don’t want to land the plane nose down. So we’re trying to balance off — can we slow the inflation without sending it into a recession.” 

Goolsbee’s comments followed those of Fed Governor Michelle Bowman who said the central bank will likely need to raise interest rates further if price pressures don’t cool. 

Yields on policy-sensitive two-year Treasuries were little changed at 3.98%. Australian and New Zealand bonds declined, following Friday’s losses in US debt.

The Bloomberg dollar index edged lower after gaining 1% last week, its biggest weekly advance since February. Bitcoin remained below $27,000. BM/DM

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