(Bloomberg) — Investors are girding for another volatile week in markets, with Asian stocks poised to open lower, major currencies vulnerable to dollar strength and bond yields elevated amid persistent inflationary pressure.
Equity index futures for Japan, Hong Kong and Australia all fell more than 1%. In foreign exchange markets, traders are on guard for possible intervention to support the yen, which is near a 32-year low and within reach of the key 150 level versus the greenback. The pound rallied in early Asia trading on expectations that the UK may reverse more of its unfunded tax cuts.
The S&P 500 fell more than 2% Friday while the growth-sensitive Nasdaq 100 dropped more than 3% and Treasury yields climbed as US year-ahead inflation expectations rose. The outlook for consumer prices fueled bets that the Federal Reserve may make jumbo rate hikes at its next two meetings, further challenging global growth.
A small uptick in US stock futures and marginal gains in major currencies against the dollar early Monday provided a touch of relief.
Yet against this wider negative backdrop, investors also have to contend with news from China’s Communist Party congress in Beijing, where President Xi Jinping said China’s global power had increased while warning of “dangerous storms” ahead. There were few signs of any let up in the Covid-Zero campaign or housing market policies that are weighing on the economy. Xi also said China would prevail in its fight to develop strategically important technology amid rising tension with the US.
UK markets may be in for a particularly torrid week, with Britain’s beleaguered prime minister Liz Truss battling to rescue her premiership after the Bank of England ended its emergency bond-buying program on Friday.
Fed officials in their latest comments suggested they were ready to hike rates higher than previously planned. Kansas City Fed President Esther George said the terminal rate may need to be higher to cool prices. San Francisco Fed’s Mary Daly said she’s “very supportive” of raising to restrictive levels and to between 4.5% and 5% “is the most likely outcome.”
Corporate America offered some bright spots Friday, with big banks including JPMorgan Chase & Co. and Wells Fargo & Co. rising after reporting results, while Morgan Stanley fell as equity trading revenue disappointed.
Key events this week:
Earnings this week will provide clues on the strength of a swathe of companies, including Bank of America Corp., China Telecom Corp., Contemporary Amperex Technology Co., Hindustan Unilever Ltd, Hong Kong Exchanges & Clearing Ltd., Goldman Sachs Group Inc., Johnson & Johnson, Netflix Inc., Tesla Inc. and United Airlines Holdings Inc.
China medium-term lending, Monday
US empire manufacturing, Monday
ECB Vice President Luis de Guindos speaks, Monday
China retail sales, industrial production, GDP, surveyed jobless, Tuesday
US industrial production, NAHB housing market index, Tuesday
Fed’s Neel Kashkari speaks, Tuesday
Euro area CPI, Wednesday
UK CPI, PPI, retail price index, Wednesday
US MBA mortgage applications, building permits, housing starts; Fed Beige Book, Wednesday
Fed’s Neel Kashkari, Charles Evans, James Bullard speak Wednesday
US existing home sales, initial jobless claims, Conference Board leading index, Thursday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.2% as of 7:23 a.m. Tokyo time. The S&P 500 fell 2.4% on Friday
Futures on the Nasdaq 100 rose 0.2%. The Nasdaq 100 fell 3.1%
Hang Seng futures fell 1.2%
S&P/ASX 200 futures fell 1.5%
Nikkei 225 futures fell 1.9%
Currencies
The euro was little changed at $0.9730
The Japanese yen was little changed at 148.66 per dollar
The offshore yuan was little changed at 7.2189 per dollar
The British pound rose 0.5% to $1.1225
Cryptocurrencies
Bitcoin fell 0.2% to $19,285.26
Ether fell 0.5% to $1,304.31
Bonds
Commodities
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Source: https://finance.yahoo.com/news/stocks-set-extend-declines-currencies-214702772.html