Asian stocks are poised for a mixed open on Tuesday as the rally in global equities shows signs of wavering and investors fret over China’s tepid post-pandemic recovery.
Futures for Japan suggested a dip at the open following a 1% slump Monday in Europe’s main equity guage. Contracts for US benchmarks fell slightly as they reopened after Wall Street was closed for a holiday Monday. Futures for Hong Kong and Australia pointed to marginal early gains.
Traders are nervous about the lack of fresh stimulus from authorities in Beijing after bidding up Chinese equities last week in the hope of a sweeping package to support the economy. Monday’s slump in tech companies including Alibaba Group Holding Ltd, JD.com Inc. and Baidu Inc. underscore the pressure on the market, particularly for big tech firms.
While there’s some hopes a thaw in icy US-China relations could help spur risk-on trading, Secretary of State Antony Blinken tempered expectations after he became the highest-level American official to visit Beijing in five years, saying his nation has “no illusions about the challenges of managing this relationship.”
Meanwhile, with the path of Federal Reserve interest rates increasingly uncertain, US traders are vacillating between the lure of the rally and concern it’s exhausted and that the market has become overbought.
Wall Street’s rally has now erased more than a year of Fed-induced losses, with stocks, volatility and the dollar shaking off the impact of 10 rate hikes. The S&P 500 index just capped a fifth straight week of gains and is now higher than it was the day the Fed kicked off its campaign.
“Optimism, or maybe just squeezed pessimists, is perhaps the strongest theme in global markets right now,” Giles Gale, rates strategist at NatWest Markets, wrote in a note. “Inflation looks surprisingly well behaved despite the Fed’s weak protests.”
Read more: Wall Street Rally Wipes Away a Year of Fed-Induced Losses
Looking ahead, Fed Chair Jerome Powell will give his semi-annual report to Congress on Wednesday. Federal Reserve Bank of St. Louis President James Bullard and his counterparts in New York and Chicago are also among this week’s speakers.
Policymakers at the Fed kept interest rates unchanged at their latest meeting but warned of more tightening ahead. The decision last week came with forecasts for higher borrowing costs of 5.6% in 2023, implying two additional quarter-point rate hikes or one half-point increase before the end of the year.
Gold dipped 0.4% on Monday, while oil fell as China’s plans to support its economy were seen as insufficient to reignite demand.
Key events this week:
- China loan prime rates, Tuesday
- US housing starts, Tuesday
- Federal Reserve Bank of St. Louis President James Bullard speaks, Tuesday
- New York Fed President John Williams speaks, Tuesday
- Federal Reserve Chair Jerome Powell delivers semi-annual congressional testimony before the House Financial Services Committee, Wednesday
- Federal Reserve Bank of Chicago President Austan Goolsbee speaks, Wednesday
- Eurozone consumer confidence, Thursday
- Rate decisions in UK, Switzerland, Indonesia, Norway, Mexico, Philippines, Turkey, Thursday
- US Conference Board leading index, initial jobless claims, current account, existing home sales, Thursday
- Federal Reserve Chair Jerome Powell delivers semi-annual testimony to Congress before the Senate Banking Committee, Thursday
- Cleveland Fed’s Loretta Mester speaks, Thursday
- Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
- Japan CPI, Friday
- UK S&P Global / CIPS UK Manufacturing PMI, Friday
- US S&P Global Manufacturing PMI, Friday
- Federal Reserve Bank of St. Louis President James Bullard speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.2% as of 7:20 a.m. Tokyo time
- Nasdaq 100 futures fell 0.2%
- Nikkei 225 futures fell 0.3%
- Australia’s S&P/ASX 200 Index futures rose 0.2%
- Hang Seng Index futures rose 0.1%
Currencies
- The euro was little changed at $1.0926
- The Japanese yen was little changed at 141.89 per dollar
- The offshore yuan was little changed at 7.1637 per dollar
- The Australian dollar was little changed at $0.6854
Cryptocurrencies
- Bitcoin rose 0.3% to $26,801.8
- Ether rose 0.3% to $1,735.09
Commodities
- West Texas Intermediate crude fell 0.7% to $71.29 a barrel
This story was produced with the assistance of Bloomberg Automation.