(Bloomberg) – Stock futures struggled for direction earlier in the week as a cautious tone from a Fed spokesman dampened exuberance that inflation may have peaked.
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U.S. stock futures fell on Monday while a European benchmark ticked higher, lifted by miners and automakers. Contracts on the S&P 500 fell 0.2%, while those on the Nasdaq 100 fell 0.4%. Asian stocks erased earlier gains as Japanese stocks dragged them lower.
Treasury yields rose and the dollar soared after Federal Reserve Governor Christopher Waller commented over the weekend that policymakers “have a long way to go” before ending rate hikes.
Some of the world’s largest wealth managers are maintaining risk-off positioning to face the threat of stalled inflation, even as price pressures ease. JPMorgan Asset Management has a record cash allocation in at least one of its strategies, while a hedge fund solutions team at UBS Group AG remains defensive.
“Markets have read too much into data pressure, US inflation has slowed but it’s not slowing,” said Salman Ahmed, chief investment strategist at Fidelity International. “The Fed will need more data to reassess the endpoint for interest rates.”
Read more: Wall Street executives fight back against fading inflation hopes
Signs of cooling in US inflation and the prospect of a dovish bias from the Fed had propelled the S&P 500 into its best week since June, weakening dollar strength. The University of Michigan’s preliminary November survey on Friday showed that US consumer inflation expectations have risen in the short and long term, while sentiment has declined.
While Waller said the rate-hike cycle would continue for some time, he noted that the Fed could start considering a 50 basis-point downgrade at the next December meeting or the one after.
The story goes on
Investors will also be keeping an eye on the G20 summit in Indonesia, where US President Joe Biden and Chinese leader Xi are expected to meet. Biden’s hand has been strengthened by Democrats defying political forecasts and historical trends to retain control of the Senate.
Chinese developer stocks and dollar-denominated bonds continued a rally on Monday, fueled by Beijing’s property rescue efforts and as the easing of Covid controls raises hopes the worst may be over.
Cryptocurrencies faltered while the sector remained under pressure amid FTX’s worsening issues. A rapid decline in the value of FTX’s key crypto assets and unauthorized withdrawals of funds following the bankruptcy filing suggest customers stand little chance of recovering much of their deposits.
Oil fell after a two-day rally as a stronger dollar offset optimism on the prospects for improved Chinese demand. gold went back.
Important events this week:
US President Joe Biden plans to meet Chinese President Xi Jinping on the sidelines of the G-20 on Monday
The Fed’s John Williams will moderate Monday’s panel
China Retail Sales, Industrial Production, Unemployment Survey, Tuesday
Former US President Donald Trump plans to make an announcement on Tuesday
US Empire Manufacturing, PPI, Tuesday
US Corporate Inventories, Cross-Border Investment, Retail Sales, Industrial Production, Wednesday
John Williams, Lael Brainard and SEC Chairman Gary Gensler speak Wednesday
ECB President Christine Lagarde speaks on Wednesday
Eurozone CPI, Thursday
US housing starts, initial jobless claims, Thursday
The Fed’s Neel Kashkari and Loretta Mester speak Thursday
US Conference Board leading index, Existing Home Sales, Friday
Some of the key movements in the markets:
Stocks
The Stoxx Europe 600 was up 0.4% at 8:21 am London time
Futures on the S&P 500 fell 0.2%
Futures on the Nasdaq 100 fell 0.4%
Futures on the Dow Jones Industrial Average were little changed
MSCI Asia Pacific Index up 0.1%
MSCI Emerging Markets Index up 0.6%
currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro was little changed at $1.0345
The Japanese yen fell 0.5% to 139.46 per dollar
The offshore yuan rose 0.9% to 7.0285 per dollar
The British pound fell 0.2% to $1.1812
cryptocurrencies
Bitcoin surged 2.8% to $16,831.24
Ether is up 4% to $1,265.21
Bind
The 10-year Treasury yield rose 7 basis points to 3.89%
Germany’s 10-year yield was little changed at 2.17%
The 10-year UK government bond yield rose one basis point to 3.37%
raw materials
Brent crude rose 0.4% to $96.41 a barrel
Spot gold fell 0.4% to $1,764.40 an ounce
This story was created with the support of Bloomberg Automation.
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