Stocks Mixed as Cautious Fed Tone Saps Ebullience: Markets Wrap

(Bloomberg) — Stock futures struggled at the start of the week in response to a cautious tone from a Federal Reserve spokesman that inflation may have peaked.

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US stock futures fell on Monday, while European benchmarks rose, lifted by miners and auto makers. Contracts on the S&P 500 were down 0.2% and Nasdaq 100 contracts were down 0.4%. Asian shares erased earlier gains, dragged down by Japanese stocks.

Treasury yields advanced and the dollar rose after comments over the weekend by Federal Reserve Governor Christopher Waller that policymakers had “a ways to go” before ending interest rate hikes.

Some of the world’s biggest money managers will remain steadfast in their risk-off positioning against inflation, even if price pressures ease. JPMorgan Asset Management has a record cash allocation in at least one of its strategies, while a hedge fund solutions group at UBS Group AG remains on the defensive.

“Markets are reading too much into one data print, U.S. inflation has slowed, but it’s not slowing,” said Salman Ahmed, chief investment strategist at Fidelity International. The stock still has to deal with hurt earnings. “Inflation is slowing for a reason, because growth is slowing.”

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Read more: Wall Street managers dash hopes for lower inflation

Signs of cooling U.S. inflation and the Fed’s inflation outlook pushed the S&P 500 to its best week since June and weakened the dollar’s strength. A preliminary survey from the University of Michigan showed on Friday that expectations for short- and long-term U.S. inflation rose, while sentiment fell.

To be sure, while Waller said the hiking cycle will continue for some time, he noted that the Fed could begin considering a 50-basis rate cut at its next meeting in December or later.

Investors are also keeping a close eye on the G20 summit in Indonesia, where US President Joe Biden and Chinese President Xi are expected to meet. Biden’s hand has been strengthened by Democrats who defy political predictions and historical trends to retain control of the Senate.

Shares of Chinese developers and dollar bonds extended their rally on Monday as Beijing’s property rescue measures and easing of Covid controls boosted hopes that the worst was over.

Cryptocurrencies were volatile as the sector came under pressure amid deepening FTX. The rapid decline in the value of FTX’s key crypto assets and unauthorized withdrawals since the bankruptcy filing suggest that customers have little chance of recovering most of their deposits.

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Oil fell after a two-day gain as a stronger dollar offset optimism around the prospect of improved Chinese demand. Gold fell.

Highlights of this week:

  • US President Joe Biden is scheduled to meet with Chinese President Xi Jinping on the sidelines of the G-20 on Monday.

  • Federal panel moderator John Williams, Monday

  • China retail sales, industrial production, unemployment, Tuesday

  • Former US President Donald Trump plans to make a statement on Tuesday

  • US imperial production, PPI, Tuesday

  • US trade stocks, cross-border investment, retail sales, industrial production, Wednesday

  • The Fed’s John Williams, Lael Brainard and SEC Chairman Gary Gensler will speak on Wednesday

  • ECB President Christine Lagarde will speak on Wednesday

  • Euro zone CPI, Thursday

  • US housing starts, initial jobless claims, Thursday

  • Fed Neel Kashkari, Loretta Mester will speak on Thursday

  • The US Conference Board’s leading index of existing home sales, Friday

Some of the major movements in the markets:

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Shares

  • The Stoxx Europe 600 was up 0.4% by 8:21 a.m. London time

  • S&P 500 futures fell 0.2%

  • Nasdaq 100 futures fell 0.4%

  • Futures on the Dow Jones industrial average were little changed

  • The MSCI Asia Pacific Index rose 0.1%

  • MSCI’s emerging market index rose 0.6%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.1%

  • The euro changed little and was 1.0345 dollars

  • 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 was down 0.2% at $1.1812.

Cryptocurrency

  • Bitcoin rose 2.8% to $16,831.24

  • Ether increased by 4% and reached $1,265.21

Bonds

  • The 10-year Treasury yield rose seven basis points to 3.89%

  • Germany’s 10-year yield was little changed at 2.17%

  • UK 10-year yields rise one basis point to 3.37%

Goods

  • The price of a barrel of Brent oil increased by 0.4% and amounted to 96.41 dollars

  • The price of spot gold decreased by 0.4% to $1,764.40 per ounce.

This story was produced with the help of Bloomberg Automation.

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