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Oil prices are headed for a fourth weekly decline
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Dollar Stable, Bitcoin Declines
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Nikkei climbs 0.9% to its highest level in 1 1/2 years
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US stock index futures rise ahead of Wall Street’s open
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US data bolsters confidence that the Fed is on pause and points to the risk of a slowdown
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Banks’ fears linger after PacWest deposits fell
By Huw Jones
LONDON, May 12 (Reuters) – A tepid economic data out of China, haggling over US government finances and uncertainty over interest rates unsettled investors and stocks remained range bound on Friday.
Oil prices headed for their fourth weekly decline as renewed economic concerns in the United States and China reignited fears over fuel demand.
The dollar held steady around a weekly high as investors bet overnight data pointing to a slowdown in the US economy would prompt the Federal Reserve to pause interest rate hikes.
On a positive note, the UK economy grew for the first three months of the year – rather than the recession forecast for late 2022 – but the recovery remains fragile.
The MSCI All Country stock index was flat for the week, little changing. In Europe, the STOXX 600 index edged up 0.4%, trading slightly higher this week as Richemont shares hit a record high on reports of strong demand in Asia-Pacific.
“We feel that markets are uncertain about whether the slowdown will be sustained or temporary, so we’re stuck in a kind of twilight zone,” said Mike Hewson, chief market strategist at CMC Markets.
A generally positive earnings season is drawing to a close and with the next major central bank interest rate meeting just weeks away, investors are looking for reasons to break out of ranges in equities, oil, currencies and bonds, analysts said.
Nasdaq futures and S&P 500 futures were slightly higher after US stocks fell on Thursday on news that PacWest was seeing a drop in deposits, reigniting worries about US regional banks.
Shares in major US banks also fell after the US Federal Deposit Insurance Corporation (FDIC) said major lenders would bear the cost of replenishing their deposit insurance fund caused by recent bank failures.
The story goes on
“We’ve had an aggressively sideways market and people are looking for something to guide it,” said Mark Tinker, chief investment officer at Toscafund Asset Management in Hong Kong.
A meeting between US President Joe Biden and senior lawmakers scheduled for Friday has been pushed back to early next week. The IMF warned that a US default would have a “severe impact” on the US economy.
“We have a lot of things to stumble upon over the next six months and that’s why people are not committing to buy,” Tinker said, citing the US debt ceiling standoff, the end of using Libor interest rates in June and the way and way The war in Ukraine is unfolding.
However, Thursday’s US data bolstered confidence that the Federal Reserve will almost certainly suspend rate hikes at its June monetary policy meeting, with futures markets continuing to price in around 78 basis points of rate cuts by year-end.
CHINA IS LOSSING STEAM
China’s economic recovery appears to be losing momentum as new bank lending contracted in April, consumer prices rose at their slowest pace in more than two years and imports fell unexpectedly, sending commodity prices from copper and iron ore to oil plummeting.
China’s blue chips fell 1.3% and are expected to fall 1.7% this week, while Hong Kong shares fell 0.5% on the day.
In Asia, MSCI’s broadest index of Asia-Pacific stocks outside Japan fell 0.6% and was heading for a 1.2% weekly decline.
However, Japanese equities fared better, with the Nikkei climbing 0.9% to its highest level since November 2021 as investors cheered announcements of higher shareholder returns during earnings season.
The US dollar benefited from safe-haven flows amid growth and banking concerns, defending modest gains against a basket of currencies.
The euro traded at $1.091, down slightly on the day, and the sterling was steady at $1.2523.
Government bond yields were little changed on the day, with the benchmark 10-year bond yielding at 3.3973% while the 2-year yield was slightly weaker at 3.8931%.
Oil prices are likely to fall for the fourth week in a row. US crude oil futures fell 0.4% to $70.56 a barrel, while Brent crude fell 0.5% to $74.60 a barrel.
Gold prices fell 0.3% to $2,008 an ounce.
Bitcoin fell 2.3% to $26,355.
(Reporting by Huw Jones, additional reporting by Stella Qiu, editing by Edwina Gibbs and Mark Potter)
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