Futures and stocks fall on Fed forecast; Dollar Growth: Market Overview

(Bloomberg) — Stock futures in Europe and the US slipped while stocks in Asia slipped as an unexpectedly strong US jobs report raised the possibility of further interest rate hikes by the Federal Reserve. Concerns about geopolitical tensions between the US and China have also weighed on sentiment.

Most read by Bloomberg

The dollar is gaining for the third day after its Strength Index rose more than 1% on Friday, when data showed jobs and unemployment rose to a 53-year low. This indicates sustained inflation in the US and confirms the need for further rate hikes. Shares in South Korea and Australia also declined.

Shares in Hong Kong and mainland China fell, with the Hang Seng index reaching its lowest closing level in a month. U.S.-listed Chinese stocks tumbled Friday after the Biden administration decided to postpone Secretary of State Anthony Blinken’s upcoming trip to China in light of a suspected Chinese spy balloon that was later shot down.

“This episode should come as a big surprise to investors, given that the market had previously expected that Sino-US relations could improve after Blinken’s now-cancelled visit,” said Willer Chen, senior analyst at Forsyth Barr Asia.

In Japan, stocks rose and the yen weakened after the Nikkei reported that the government had approached BOJ deputy governor Masayoshi Amamiya to replace Haruhiko Kuroda as central bank governor. Although the Japanese government has denied the report, investors are suggesting a strong possibility that the current ultra-easy monetary policy will continue if one of its architects succeeds Kuroda.

“The chances of abandoning current policies have become slim,” Toru Suehiro, chief economist at Daiwa Securities, said in a note. “While reversal of yield curve control is possible once the bond market is confirmed to stabilize, a clear rate hike, such as an end to the negative rate, seems unlikely.”

The story goes on

Meanwhile, strong U.S. labor market data released on Friday “had major policy implications for the Fed—in short, it confirms our long-standing belief that the Fed will have to grow longer than optimistic market scenarios suggested,” Win Thin. head of currency strategy at Brown Brothers Harriman, wrote in a note. “We still have ways to hit the peak federal funds rate, and yet people are still waiting for a rate cut in the second half of the year, which would be an extremely quick turnaround.”

Employment data pushed Treasury bond yields higher for the second day in a row, while Australian bonds fell. According to Daniel Mulholland, head of rates at Crews & Associates, traders will be watching the $96 billion Treasury and bond auctions this week, which will be a test for the market.

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

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

Adani Group’s assets are facing continued volatility this week. All 10 of the group’s stocks declined at the open in India, adding to their sell-off. Flagship company Adani Enterprises Ltd. has decided to shelve plans for its first-ever public bond sale, people familiar with the matter say. While stocks fell less sharply on Friday than in previous days, the collapse in stocks roughly halved the market value of the Indian group’s companies following Hindenburg Research’s allegations of manipulation and accounting fraud.

“Obviously, this is very important for the country, because the operating business is very widespread,” Belita Ong, chairman of Dalton Investments, told Bloomberg Television. “We trust that the government will take all necessary steps to stabilize the situation so that the operational authorities will work.”

Key events of this week:

• Earnings this week should 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

• Australian Rate Decision Tuesday

• US Trade Tuesday

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

• US President Joe Biden delivers an address to the US Congress on Tuesday.

• India Rate Decision Wednesday

• US Wholesale Stock Wednesday

• New York Fed chief John Williams at an event in New York

• Sweden Rate Decision, Thursday

• US Initial Jobless Claims Thursday

• ECB President Christine Lagarde attends the EU leaders’ summit, Thursday

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

• China PPI, CPI, Balance of Payments, Friday

• University of Michigan Consumer Sentiment, Friday

• Statement by Christopher Waller and Patrick Harker of the Fed, Friday

Some of the major movements in the markets are:

Stock

• S&P 500 futures were down 0.4% as of 6:28 am 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%

• Japanese Topix index up 0.5%

• The South Korean Kospi fell 1.4%.

• The Hong Kong Hang Seng index fell 2.3%.

• China’s Shanghai Composite fell 1%

• India’s Nifty 50 fell 0.6%.

• Australian S&P/ASX 200 fell 0.3%

Currencies

• Spot Bloomberg Dollar Index up 0.2%

• The euro changed slightly 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 almost unchanged at $1.2064.

Cryptocurrencies

• Bitcoin fell 0.5% to $22,780.47.

• Ether was up 0.2% to $1,626.07.

Bonds

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

• The yield on 10-year Japanese bonds remained unchanged at 0.49%.

• The yield on 10-year Australian bonds rose eight basis points to 3.46%.

Goods

• 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.

–Contributed by Richard Henderson, Charlotte Young and Michael G. Wilson.

The most read edition of Bloomberg Businessweek

© 2023 Bloomberg LP