Dollar Rises, Stocks Face Headwinds From Fed Rates: Markets Wrap

(Bloomberg) — The dollar rose in early trading on Monday, adding to a third week of gains as hawkish comments by Federal Reserve officials and geopolitical tensions bolstered the appeal of the greenback. Asian stocks looked set for a mixed open.

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Australia’s benchmark index fluctuated while US equity futures dropped after the S&P 500 Index declined Friday and slid for a second week. Contracts for Japanese shares pointed to small gains while those for Hong Kong fell.

A report from Goldman Sachs Group Inc. tipping a rebound in Chinese stocks added a counterweight to the flow of news damping appetite for equities. Investors in China will also be on the lookout for any potential cut to the nation’s prime loan rates Monday.

The dollar made small advances versus most of its Group-of-10 peers following a weekend that saw no cooling of US-China tensions. Beijing’s top diplomat labeled the American response to the balloon it shot down “hysterical” while his counterpart Antony Blinken said its entry into his nation’s airspace was “irresponsible.” Meanwhile, North Korea test-fired an intercontinental ballistic missile.

Above and beyond this, investors are focused on the shifting outlook for interest rates, with traders fully pricing in quarter-point interest rate increases at the Fed’s next two meetings after policymakers said Thursday that bigger hikes were not out of the question.

Federal Reserve Bank of Richmond President Thomas Barkin said Friday that he favored a quarter-point interest rate hike in February to give the central bank “flexibility” in its quest to tamp down inflation. Fed Governor Michelle Bowman said rates need to keep going higher since inflation remains “much too high.”

In commodities, oil rose fractionally after capping its longest string of daily losses on the year last week. Rising US oil inventories and the prospect of further tightening by the Fed last week eclipsed the lift from signs that Chinese energy demand is improving.

Key events this week:

Earnings for the week are scheduled to include: Alibaba, Anglo American, AXA, BAE Systems, Baidu, BASF, BHP, Danone, Deutsche Telekom, EBay, Holcim, Home Depot, Hong Kong Exchanges & Clearing, HSBC, Iberdrola, Lloyds Banking Group, Moderna, Munich Re, Newmont, Nvidia, Rio Tinto, Walmart, Warner Bros Discovery
China loan prime rates, Monday
US financial markets closed for Presidents’ Day holiday, Monday
PMIs for Japan, Eurozone, UK, US, Tuesday
US existing home sales, Tuesday
US MBA mortgage applications, Wednesday
The Federal Reserve minutes from Jan. 31-Feb. 1 policy meeting, Wednesday
Eurozone CPI, Thursday
US GDP, initial jobless claims, Thursday
Atlanta Fed President Raphael Bostic speaks, Thursday
G-20 finance ministers and central bank governors meet in India, Thursday-Friday
Japan CPI, Friday
BOJ governor-nominee Kazuo Ueda appears before Japan’s lower house, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.2% as of 8:19 a.m. Tokyo time. The S&P 500 closed 0.3% lower on Friday
Nasdaq 100 futures fell 0.3%. The Nasdaq 100 closed 0.7% lower on Friday
Nikkei 225 futures rose 0.2%
Australia’s S&P/ASX 200 Index was little changed
Hang Seng Index futures fell 0.6%

Currencies

The euro fell 0.1% to $1.0683
The Japanese yen fell 0.1% to 134.30 per dollar
The offshore yuan was little changed at 6.8789 per dollar
The Australian dollar fell 0.2% to $0.6866

Cryptocurrencies

Bitcoin fell 0.6% to $24,399.31
Ether fell 0.2% to $1,683.52

Bonds

Commodities

West Texas Intermediate crude rose 0.1% to $76.42 a barrel
Gold rose 0.3% to $1,842.36 an ounce on Friday

This story was produced with the assistance of Bloomberg Automation.