(Bloomberg) — Shares declined Monday in choppy trading as investors split their attention between looming interest-rate decisions in the US and Europe, the reopening of mainland China markets and a plunge in Adani Group assets.
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Futures for the S&P 500 and Euro Stoxx 50 slid, as did most Asian benchmarks. The Shanghai Shenzhen CSI 300 Index slid from intraday highs, coming in just short of entering a bull market as onshore exchanges resumed after the week-long Lunar New Year holiday.
The rout in India’s Adani Group stocks swelled to $66 billion and its bonds were under pressure as the fight with short seller Hindenburg Research escalated. Adani Green Energy Ltd. and Adani Total Gas Ltd. fell more than 20% again.
This contrasted with optimism in bets that the Federal Reserve will slow the pace of rate hikes later this week, and in the advance on Wall Street Friday. Traders brushed off disappointing outlooks from some of the world’s largest technology companies to push the Nasdaq 100 up 1%. Futures for the index fell on Monday.
Still, the broader outlook for the Fed is keeping downward pressure on the dollar, which has helped Asian markets outperform the US this year. China’s pivot away from Covid Zero policies is also boosting the region, with indications over the last week that infections don’t appear to have gotten out of control during the festive season, while consumption statistics have supported wagers for economic recovery.
By midweek central banks are likely to dominate the agenda, beginning on Wednesday with the Fed, which is expected to downshift to a 25 basis points increase in interest rates amid signs of cooling inflation.
A report Friday showed the Fed’s preferred inflation measures eased in December to the slowest annual pace in over a year and spending fell. Separate data from the University of Michigan showed US inflation expectations continued to retreat in late January, helping boost consumer sentiment.
“We look at the data flow and see a market that senses a positive outcome for risk assets and where pullbacks should be shallow,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note. He also cautioned that this is “one of the biggest weeks of absolute tier 1 event risk in recent memory,” and added that the rise in commodities prices is concerning.
The European Central Bank and the Bank of England are each projected to hike by half a percentage point when they deliver decisions a day after the Fed.
The nascent year’s tech resurgence gave the Nasdaq 100 its best week since November — with Tesla Inc. and Facebook parent Meta Platforms Inc. climbing at least 3% Friday. The gauge also notched its fourth straight weekly advance. That’s even after a bleak forecast from Intel Corp. that followed recent worrisome remarks from Microsoft Corp. and Texas Instruments Inc.
Elsewhere in markets, a gauge of dollar strength was little changed on Monday and Group-of-10 currencies mostly traded in relatively narrow ranges. The onshore yuan rallied in a catchup move.
The yen strengthened after a panel of experts said the Japanese government and the central bank should revise their joint policy statement to make an inflation target a long-term goal.
Japan’s 10-year yield steadied at 0.475%, versus the central bank’s 0.5% ceiling. Benchmark 10-year Treasury yields were little changed.
Meanwhile, hedge funds are betting this year’s stellar start for Treasuries is too good to last, quietly building up the biggest bearish bet on bond futures on record.
An aggregate measure of net-short non-commercial positions across all Treasuries maturities has hit 2.4 million contracts, according to the latest data from the Commodity Futures Trading Commission as of Jan. 24.
Oil fell as traders parsed signals on demand from China while tracking an uptick in tensions in the Middle East after Israel was reported to have carried out a drone strike against a target in Iran.
Key events this week:
International Monetary Fund’s world economic outlook, Monday
China industrial profits, PMIs, Tuesday
Eurozone GDP, Tuesday
US Conference Board consumer confidence, Tuesday
Earnings Tuesday include: UBS, Unicredit, Snap and Advanced Micro Devices
Eurozone Manufacturing PMI, CPI, unemployment, Wednesday
US construction spending, ISM Manufacturing, light vehicle sales, Wednesday
FOMC rate decision, Fed Chair Jerome Powell press conference, Wednesday
Earnings Wednesday include: Meta Platforms and Peloton Interactive
Eurozone ECB rate decision, President Christine Lagarde press conference, Thursday
UK BOE rate decision, Thursday
US factory orders, initial jobless claims, US durable goods, Thursday
Earnings Thursday include: Alphabet, Apple, Amazon, Qualcomm and Deutsche Bank and Santander
Eurozone S&P Global Eurozone Services PMI, PPI, Friday
US unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.5% as of 7:22 a.m. London time.
Nasdaq 100 futures fell 0.6%
Euro Stoxx 50 futures fell 0.5%
Japan’s Topix was little changed
Australia’s S&P/ASX 200 fell 0.2%
Hong Kong’s Hang Seng fell 3.6%
The Shanghai Composite rose 0.1%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.1% to $1.0855
The Japanese yen rose 0.3% to 129.54 per dollar
The offshore yuan was little changed at 6.7539 per dollar
The British pound was little changed at $1.2376
Cryptocurrencies
Bitcoin fell 0.6% to $23,657.28
Ether fell 1% to $1,627.51
Bonds
The yield on 10-year Treasuries was little changed at 3.50%
Japan’s 10-year yield steadied at 0.475%
Australia’s 10-year yield declined three basis points
Commodities
This story was produced with the assistance of Bloomberg Automation.
(An earlier version of this wrap corrected ti fix the unit of measurement for forecast hikes by the BOE and ECB.)
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Source: https://finance.yahoo.com/news/stocks-buoyed-china-reopen-rate-004447572.html