The dollar inched lower versus most of its major counterparts while Asian equity futures pointed to a cautious open to trading.
(Bloomberg) — The dollar inched lower versus most of its major counterparts while Asian equity futures pointed to a cautious open to trading.
Investors will be focused Monday on Chinese interest rates and Beijing’s efforts to bolster the struggling economy, before attention shifts later in the week to a gathering of global central bankers at Jackson Hole, Wyoming.
The greenback’s early weakness followed small loses Thursday and Friday that trimmed what has still been five weeks of gains for a gauge of the currency’s strength. Contracts for shares benchmarks in Hong Kong and Australia fell while those for Japan were marginally higher.
US stocks gained some ground in the final minutes of Friday’s session in moves likely exacerbated by giant options expiration. But it wasn’t enough to prevent the S&P 500 ending unchanged and the Nasdaq 100 inching down. MSCI Inc.’s global equities benchmark notched its biggest weekly loss since the March meltdown of Silicon Valley Bank.
For American megacap tech stocks, it was the third straight weekly drop, the longest such streak in 2023, as fears of higher global interest rates weighed on sentiment while bonds bounced off multiyear lows.
While concerns of an imminent recession are fading, wary investors are instead facing entrenched inflation and the prospect of more policy tightening.
In China this morning, one-year and five-year prime loan rates are projected to be cut by 15-basis-points. Meanwhile, the central bank and financial regulators met with bank executives and told lenders again to boost loans, adding to signs of heightened concern about the economic outlook.
Elsewhere the pressure on rates is mostly upward, particularly in the US. The Treasury 10-year yield pulled back Friday from levels Thursday that were approaching the highest since 2007.
That’s put investors on edge ahead of the Jackson Hole event on Thursday and Friday, which features speakers including Federal Reserve Chair Jerome Powell and his European counterpart President Christine Lagarde.
“Investors are concerned that if bond yields continue going higher, the economy is too strong and the Fed will need to raise interest rates further,” said David Donabedian, chief investment officer of CIBC Private Wealth US. “And with the bond yield high enough, that poses competition for equity investors who feel the bond market is less risky than the stock market right now.”
In another sign of nervousness, the Cboe Volatility Index climbed above 18 intraday, touching the highest level since May. Bank of America Corp.’s Michael Hartnett warned that stocks may drop another 4%, given China’s economic turmoil and jump in bond yields.
Key events this week:
- China loan prime rates, Monday
- US existing home sales, Tuesday
- Chicago Fed’s Austan Goolsbee speaks, Tuesday
- Eurozone S&P Global Services & Manufacturing PMI, consumer confidence, Wednesday
- UK S&P Global / CIPS UK Manufacturing PMI, Wednesday
- US new home sales, S&P Global Manufacturing PM, Wednesday
- US initial jobless claims, durable goods, Thursday
- Kansas City Fed’s annual economic policy symposium in Jackson Hole begins, Thursday
- Japan Tokyo CPI, Friday
- US University of Michigan consumer sentiment, Friday
- Fed Chair Jerome Powell, ECB President Christine Lagarde to address Jackson Hole conference, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.1% as of 7:13 a.m. Tokyo time. The S&P 500 was little changed Friday
- Nasdaq 100 futures rose 0.3%. The Nasdaq 100 fell 0.1%
- Nikkei 225 futures rose 0.2%
- Australia’s S&P/ASX 200 Index futures fell 0.3%
- Hang Seng Index futures fell 0.6%
- The euro was little changed at $1.0876
- The Japanese yen was little changed at 145.34 per dollar
- The offshore yuan was little changed at 7.3060 per dollar
- The Australian dollar was little changed at $0.6408
- Bitcoin fell 0.1% to $26,195.14
- Ether fell 0.4% to $1,682.29
- The yield on 10-year Treasuries declined two basis points to 4.25% Friday
- West Texas Intermediate crude was unchanged at $81.25 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Isabelle Lee and Cristin Flanagan.
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