US stock futures declined and the dollar traded in tight ranges versus major peers as investors weighed signs of progress in talks to avert a debt default and persistent inflationary pressure.
Much of the action early Monday was in emerging-markets currencies. The baht climbed as pro-democracy parties won a resounding victory in Thai elections, the rand rallied after South African moved to ease tensions with the US and investors awaited trading in the lira with Turkey’s presidential race hanging in the balance.
The picture for Asian stocks was mixed, with futures for Hong Kong down, those for Japan up and contracts for Australia’s benchmark marginally lower.
That followed stocks and bonds floundering on Wall Street on Friday as investors lost faith that a pause in the Federal Reserve’s interest-rate hiking cycle was a given. The S&P 500 ended the week down 0.3% while the Nasdaq 100 eked out a 0.6% advance.
Inflation concerns persist, with a preliminary University of Michigan sentiment survey showing consumers expect prices to rise at a 3.2% annual rate over the next five to 10 years, a 12-year high.
It’s a very different situation in China, were inflationary pressure has been in retreat, raising speculation that the central bank may ease monetary policy. Bloomberg Economics projects a 10 basis points cut in the medium-term lending facility rate Monday while other analysts expect it to remain at 2.75%.
Meanwhile, progress in US debt-ceiling talks hasn’t removed the risk of a failure to reach a compromise. Treasury Secretary Janet Yellen has warned that the department could run out of money as soon as June 1, or in the weeks after that.
Hawkish comments from Fed officials have added to unease among investors. Inflation is still too high, Chicago Fed President Austan Goolsbee said in PBS interview. “You don’t want to land the plane nose down. So we’re trying to balance off — can we slow the inflation without sending it into a recession.”
Goolsbee’s comments followed those of Fed Governor Michelle Bowman who said the central bank will likely need to raise interest rates further if price pressures don’t cool.
Yields on the policy-sensitive two-year Treasuries climbed to 3.99% on Friday while the 10-year rose to 3.46%. Yields on new Zealand government debt were slightly higher Monday.
The dollar notched its biggest weekly gain since February as investors embraced its safe haven status. Bitcoin dropped below $27,000 and remained there on Monday.
Key events this week:
- China one-year medium-term lending facility rate, Monday
- Eurozone industrial production, Monday
- US cross-border investment, New York Fed Empire Manufacturing, Monday
- Atlanta Fed’s Raphael Bostic speaks at his bank’s annual financial markets conference, Monday
- China retail sales, industrial production, Tuesday
- US retail sales, industrial production, business inventories, Tuesday
- Fed speakers include Cleveland’s Loretta Mester, New York’s John Williams, Atlanta’s Raphael Bostic and Chicago’s Austan Goolsbee, Tuesday
- Japan GDP, Wednesday
- Eurozone CPI, Wednesday
- US housing starts, Wednesday
- BOE Governor Andrew Bailey speaks at the British Chamber of Commerce, Wednesday
- US initial jobless claims, Conference Board leading index, existing home sales, Thursday
- Japan CPI, Friday
- ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday
- New York Fed’s John Williams speaks at monetary policy research conference in Washington, and Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.2% as of 7:09 a.m. Tokyo time. The S&P 500 fell 0.2% Friday
- Nasdaq 100 futures fell 0.3%. The Nasdaq 100 fell 0.4%
- Nikkei 225 futures rose 0.5%
- Australia’s S&P/ASX 200 Index futures rose 0.1%
- Hang Seng Index futures rose 0.9%
Currencies
- The euro was little changed at $1.0854
- The Japanese yen was little changed at 135.72 per dollar
- The offshore yuan was little changed at 6.9703 per dollar
- The Australian dollar was little changed at $0.6648
Cryptocurrencies
- Bitcoin fell 0.2% to $26,911.22
- Ether was little changed at $1,800.07
Bonds
- The yield on 10-year Treasuries advanced eight basis points to 3.46% on Friday
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Peyton Forte.