US Futures, Euro Decline as Energy Woes Sour Mood: Markets Wrap

(Bloomberg) — The euro slipped ahead of a likely weak start for Asian bourses on Monday as a worsening energy crisis in Europe stokes concerns about the global economic outlook.

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Futures fell for Japan, Australia and Hong Kong, while US contracts declined after the worst week for world shares since a June drop to bear market lows.

More dollar strength was evident early in Asian trading, with commodity-linked currencies and the British pound joining the euro’s retreat.

Gazprom PJSC last week again halted its key European gas pipeline indefinitely after Group of Seven leaders agreed to implement a price cap on Russian oil as the Kremlin continues its war in Ukraine.

European ministers will discuss special measures to rein in soaring power costs, from gas-price caps to a suspension of power derivatives trading. Germany — most affected by the Nord Stream pipeline cutoff — over the weekend unveiled a $65 billion package to protect consumers.

There’s no cash Treasuries trading because of the Labor Day break, which also shutters the US stock market. New Zealand bonds were steady. Elsewhere, crude rose to around $88 a barrel. Bitcoin held a drop to below $20,000.

Monetary authorities including Europe’s central bank are set to keep hiking interest rates this week to fight inflation despite a darkening global economic outlook due to risks such as energy shortages and China’s Covid curbs. An attendant advance in real yields — seen as the true cost of money for borrowers — poses an obstacle to a variety of risk assets.

“Russia’s response to the G7’s plan to apply price caps on Russian oil imports was to shut off the Nord Stream 1 pipeline and we’re at the point where lots of questions are being asked by the market on how this escalates and right now there is minimal clarity,” Chris Weston, Pepperstone Group Ltd. head of research, wrote in a note.

Elsewhere, the Biden administration is considering moves to restrict US investment in Chinese technology firms. It will also allow Trump-era tariffs on hundreds of billions of dollars of Chinese merchandise imports to continue while it reviews the duties.

Meanwhile, China extended its lockdown in districts of the western megacity Chengdu and ordered more mass testing there from Sunday as it tries to contain a Covid outbreak.

Some of the main moves in markets:

Stocks

S&P 500 futures lost 0.2% as of 7:20 a.m. in Tokyo. The S&P 500 fell 1.1%
Nasdaq 100 futures lost 0.3%. The Nasdaq 100 fell 1.4%
Nikkei 225 futures fell 0.6%
Australia’s S&P/ASX 200 Index futures fell 0.2%
Hang Seng Index futures lost 0.6%

Currencies

The Bloomberg Dollar Spot Index rose 0.2%
The euro fell 0.4% to $0.9910
The Japanese yen fell 0.1% to 140.27 per dollar
The offshore yuan fell 0.1% to 6.9240 per dollar

Bonds

Commodities

West Texas Intermediate crude rose 1.2% to $87.94 a barrel
Gold was at $1,711.14 an ounce