Asian stocks traded in tight ranges Monday and oil rose, while Treasury yields inched higher as investors weighed the Federal Reserve’s higher-for-longer stance.
Equity benchmarks in Japan opened flat and US futures contracts were moderately higher while share indexes in Australia and South Korea fell. Oil climbed for a second day as hedge funds piled on bets that tightening supplies will see a resumption of the rally after a pause last week.
Those moves followed a 0.2% decline for the S&P 500 on Friday to cap its worst week since March. Nasdaq 100 futures advanced 0.2% Monday after the underlying gauge ended little changed Friday, supported by gains in Apple Inc. as its latest iPhones and watches went on sale.
An index of US-listed Chinese companies rose on news that Washington and Beijing are forming working groups to discuss economic and financial issues.
Treasuries yields were broadly higher after a decline on Friday that supported bond prices. US government bonds will be in focus again this week, with Fed officials speaking at public events. Investors will also be watching the release of a key inflation gauge in the US, and assessing the likely impact of a possible US government shutdown.
An index of dollar strength was little changed and the yen held steady near its weakest level this year. The Japanese currency is likely to remain under pressure given the widening yield gap with the US after the Bank of Japan maintained its ultra-easy settings last week.
Traders are still very concerned about inflation and the path of policy amid the recent oil rally and the Fed’s signal that rates are not going to come down any time soon, according to Fawad Razaqzada, a market analyst at City Index and Forex.com.
“It is far too early to say the markets have bottomed, as fundamentally nothing has changed,” Razaqzada noted.
Two Fed officials said at least one more rate hike is possible and that borrowing costs may need to stay higher for longer for the central bank to ease inflation back to its 2% target. While Boston Fed President Susan Collins said further tightening “is certainly not off the table,” Governor Michelle Bowman signaled that more than one increase will probably be required, cementing her position as one of the Federal Open Market Committee’s most hawkish members.
Fed Bank of San Francisco President Mary Daly said she is not ready to declare victory in the fight against inflation, and that the central bank is still committed to curbing price pressures “as gently as possible.”
The yield on 10-year Treasuries could reach 4.75% before softer risk sentiment and tighter financial conditions push it lower into year-end, according to rates strategists at Bank of America Corp.
Elsewhere in markets, Bitcoin declined over 1% while gold was little changed.
Key events this week:
- Minneapolis Fed President Neel Kashkari in Q&A, Monday
- ECB’s Francois Villeroy de Galhau speaks on monetary policy, Monday
- US new home sales, Conference Board consumer confidence, Tuesday
- ECB’s Philip Lane speaks on monetary policy, Tuesday
- China industrial profits, Wednesday
- US durable goods, Wednesday
- Eurozone economic confidence, consumer confidence, Thursday
- US initial jobless claims, GDP, Thursday
- Fed Chair Jerome Powell town hall meeting with educators while Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee make speeches, Thursday
- Eurozone CPI, Friday
- Japan unemployment, industrial production, retail sales, Tokyo CPI, Friday
- US consumer spending, wholesale inventories, University of Michigan consumer sentiment, Friday
- ECB President Christine Lagarde speaks, Friday
- New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 9:24 a.m. Tokyo time. The S&P 500 fell 0.2% Friday
- Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 0.1% Friday
- Hang Seng futures fell 0.3%
- Japan’s Topix fell 0.1%
- Australia’s S&P/ASX 200 fell 0.5%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0650
- The Japanese yen was little changed at 148.43 per dollar
- The offshore yuan was little changed at 7.2961 per dollar
- The Australian dollar was little changed at $0.6444
Cryptocurrencies
- Bitcoin fell 1.4% to $26,126.59
- Ether fell 1.1% to $1,572.85
Bonds
- The yield on 10-year Treasuries advanced two basis points to 4.45%
- Australia’s 10-year yield declined one basis point to 4.32%
Commodities
- West Texas Intermediate crude rose 0.3% to $90.30 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Rita Nazareth.
