(Bloomberg) — Stocks and U.S. equity futures fell along with Treasuries Monday amid heightened worries about inflation risks and tightening financial conditions. A gauge of the dollar climbed.
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An Asia-Pacific equity index shed more than 1%, dropping to the lowest since mid-March. China and Hong Kong struggled, with tech shares skidding on new guidelines from Beijing aimed at curbing data monopolies at internet platforms.
U.S. and European futures also declined, pointing to more challenges for global shares after the Federal Reserve last week signaled sharp interest-rate hikes and balance-sheet reduction to curb price pressures.
The 10-year Treasury yield touched 2.77%, exceeding the equivalent rate on Chinese debt for the first time since 2010. Real U.S. yields are getting closer to turning positive, a development that could be an impediment for risk assets. Australia’s 10-year rate hit 3% for the first time since 2015.
Oil resumed its decline on risks to demand from China’s Covid outbreak and lockdowns, including extensive curbs in Shanghai.
Market sentiment continues to be shaped by the hawkish Fed and inflation pressures from commodity-market disruptions caused by Russia’s invasion of Ukraine. China’s Covid curbs threaten to exacerbate supply-chain snarls, further stoking costs. The nation’s factory gate prices increased more than expected in March.
“Today, the mantra for many investors is ‘Don’t fight the Fed when it is fighting inflation,’” Ed Yardeni, president of Yardeni Research, wrote in a note. “We agree with that, but it’s not as bearish as it sounds” in part because accumulated excess liquidity and an inflation boost to earnings are props for stocks, he added.
Cleveland Fed President Loretta Mester said she’s confident that the U.S. will avoid a recession as the Fed tightens policy, though the inflation rate will probably remain at more than 2% into next year.
Euro Swings
The euro climbed as much as 0.7% versus the greenback before paring the gain after Emmanuel Macron emerged from the first round of France’s presidential election with a narrow advantage over nationalist rival Marine Le Pen.
Investors have been fretting about the implications of a victory for Le Pen in the midst of the the war in Ukraine, given her longstanding sympathies for Russia.
Russia appointed a new commander for its operations in Ukraine. Moscow is refocusing its war effort in the east, having failed to secure territory around the capital, Kyiv.
Russia said it will halt bond auctions for the remainder of 2022 due to prohibitive borrowing costs. The country’s first external default in a century now looks all but inevitable after it was sanctioned and isolated over the conflict.
In cryptocurrencies, Bitcoin was on the back foot, falling under $42,000.
Events to watch this week:
Earnings season kicks off, including reports from Citigroup, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Taiwan Semiconductor Manufacturing, Wells Fargo
Chicago Fed President Charles Evans due to speak, Monday
EU foreign ministers meet, more Russia measures on the agenda, Monday
U.S. CPI, Tuesday
OPEC monthly oil market report, Tuesday
Fed Governor Lael Brainard, Richmond Fed President Thomas Barkin due to speak, Tuesday
Bank of Canada rate decision, Wednesday
EIA crude oil inventory report, Wednesday
Reserve Bank of New Zealand rate decision, Wednesday
China trade, medium-term lending facilities, Wednesday
ECB rate decision, Thursday
Bank of Korea policy decision, Thursday
U.S. retail sales, initial jobless claims, business inventories, University of Michigan consumer sentiment, Thursday
Cleveland Fed President Loretta Mester, Philadelphia Fed President Patrick Harker due to speak Thursday
U.S. stock and bond markets are among those closed for Good Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.6% as of 11:58 a.m. in Tokyo. The S&P 500 fell 0.3%
Nasdaq 100 futures fell 0.8%. The Nasdaq 100 fell 1.4%
Japan’s Topix index shed 0.6%
South Korea’s Kospi index dropped 0.6%
Australia’s S&P/ASX 200 Index was steady
Hong Kong’s Hang Seng Index fell 2.6%
China’s Shanghai Composite Index fell 2%
Euro Stoxx 50 futures dropped 0.6%
Currencies
The Japanese yen was at 124.86 per dollar, down 0.4%
The offshore yuan was at 6.3801 per dollar, down 0.2%
The Bloomberg Dollar Spot Index rose 0.2%
The euro was at $1.0877
Bonds
Commodities
West Texas Intermediate crude fell 2.3% to $96.01 a barrel
Gold was at $1,943.06 an ounce
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Source: https://finance.yahoo.com/news/stocks-set-steady-open-euro-222511107.html