Stocks, U.S. Futures Dip; Treasuries Remain Lower: Markets Wrap

(Bloomberg) — Stocks and US futures dipped Monday amid intensifying bets on Federal Reserve interest-rate hikes that are also weighing on bonds. Australian debt slide and Treasuries remained lower.

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Shares in Japan, Australia and South Korea retreated, while S&P 500 and Nasdaq 100 futures edged lower. China resumes trading later after a weeklong holiday, and stocks there may be supported by a Friday surge in Hong Kong-listed names and easing concerns about some regulatory headwinds.

Markets now expect more than five quarter-point Fed rate hikes in 2022 to quell inflation following a strong US jobs report. The 10-year US Treasury yield was steady at about 1.90% and a dollar gauge was stable.

Oil’s ongoing rally paused at around $92 a barrel. Bitcoin climbed above $42,000 to the highest level in over two weeks.

Investors are grappling with the prospect of the biggest tightening of monetary policy since the 1990s. Traders are on tenthooks for the US inflation report this week, which has the potential to stoke more swings by shaping views on Fed tightening. A reading north of 7%, the highest since the early 1980s, is expected.

The Fed is in a difficult spot, “trying to manage the real economy where we see that hot inflation and the financial economy, which quivers every time we talk about rate rises,” Karen Harris, Bain & Co. global head of macro research, said on Bloomberg Television.

Elsewhere, European Central Bank Governing Council Member Klaas Knot said he expects a rate increase as early as in the fourth quarter. The ECB last week made a hawkish pivot, with President Christine Lagarde no longer excluding a rate hike this year. That has pressured European sovereign debt.

“The momentum trade has been to short bonds and many are now fearing higher bond yields will really start to bite in equity land,” Chris Weston, head of research with Pepperstone Financial Pty Ltd., wrote in a note.

In the latest on Ukraine, President Joe Biden and his French counterpart Emmanuel Macron talked by phone about responding to Russia’s military buildup on the Ukrainian border. Moscow has repeatedly denied that it plans an attack.

Read: Goodbye Easy Money as Hawkish Central Banks Speed ​​Up Rate Hikes

Here are some events to watch this week:

  • Earnings: AstraZeneca, Commonwealth Bank of Australia, GlaxoSmithKline, Pfizer, SoftBank Group, Toyota Motor, Twitter, Uber, Walt Disney

  • China Caixin services PMI, forex reserves Monday

  • Federal Reserve Bank of Cleveland President Loretta Mester speaks Wednesday

  • Reserve Bank of India rate decision Thursday. The meeting was postponed to mourn the death of a famous singer.

  • Bank Indonesia rate decision Thursday

  • UK Bank of England Governor Andrew Bailey speaks Thursday

  • US CPI, initial jobless claims Thursday

Some of the main moves in markets:

Inventory

  • S&P 500 futures fell 0.2% as of 9:24 am in Tokyo. The S&P 500 pink 0.5% Friday

  • Nasdaq 100 futures slipped 0.3%. The Nasdaq 100 rose 1.3% Friday

  • Japan’s Topix index fell 1%

  • Australia’s S&P/ASX 200 Index fell 0.8%

  • South Korea’s Kospi index fell 1%

  • Hang Seng Index futures rose 0.2% earlier

Currencies

  • The Japanese yen was at 115.17 per dollar

  • The offshore yuan was at 6.3606 per dollar

  • The Bloomberg Dollar Spot Index was steady

  • The euro was at $1.1452

Leaps

Commodities

  • West Texas Intermediate crude fell 0.7% to $91.68 a barrel

  • Gold was at $1,812.63 an ounce, up 0.2%

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