Stocks mixed in cautious trading; Dollar rises: Markets unwind

(Bloomberg) – Asian equities were mixed and US and European stock futures edged higher on a cautious start to trading on Monday as investors weighed the prospect of more rate hikes and an economic slowdown. The dollar won.

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Stocks were higher in Japan and Australia, while Hong Kong stocks faltered, rose in Shanghai after the People’s Bank of China kept interest rates unchanged and made the smallest net liquidity injection since November.

Futures on the S&P 500 were up 0.2%, those on the Euro Stoxx 50 were up about the same amount and contracts on the Nasdaq 100 were little changed. The S&P 500 rose 0.8% last week and the Nasdaq 100 squeezed out a 0.1% gain as policy-making tech names like Microsoft Inc. and Apple Inc. battered the tech display. Swaps traders increased bets on a rate hike through June and pricing suggests a quarter point hike has a better odds than three in four for May.

The dollar edged up slightly against its main rivals. Treasury yields were little changed, with the rate-sensitive 2-year bond fluctuating 4.1% on Monday. It was buoyed higher last week by a March retail sales reading that showed core stocks had fallen less than estimated and comments from Fed officials. Australian and New Zealand government bond yields rose in early trade.

Looking ahead this week, investors are awaiting the release of the Fed’s Beige Book and comments from officials including John Williams, Raphael Bostic, Loretta Mester and Lisa Cook. Markets were shaken last week after Fed Governor Christopher Waller said he advocated further monetary tightening in the central bank’s fight against inflation.

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Traders have increased their bets on at least one more Federal Reserve rate hike this year as concerns about the banking sector ease and inflationary pressures persist in the US.

“I don’t think all of the rate hikes have made their way through the system and it looks like the Fed will tighten further,” Frances Stacy, director of strategy at Optimal Capital Advisors, told Bloomberg Television. “I don’t think we’re quite out of the woods yet, but that doesn’t mean the risk is going to happen overnight, but if something does hit, markets can drop quite dramatically.”

Much of the focus in Asia will be on China and the strength of its economic recovery. Tuesday’s figures are expected to show that gross domestic product grew 3.9% year on year in the first quarter, well below the government’s target of around 5% growth for the full year. March data could show increases in industrial production, investment and retail sales.

In Japan, shares of security companies rose after Prime Minister Fumio Kishida was attacked by an IED at an event he was attending in central Japan, weeks before he hosted world leaders at a G-7 summit. There was little discernible impact on the broader Japanese markets.

Financials outperformed last week, with JPMorgan Chase & Co. and Citigroup Inc. taking the lead on gains, and the sector will remain in the hot seat on Monday when Charles Schwab Corp. and State Street Corp. to report.

Investors will be waiting for signs of health from Schwab, which has fallen nearly 40% this year as rising interest rates have pushed unrealized losses at the broker. Bank of America Corp. and Goldman Sachs Group Inc. will report later in the week, as will Netflix Inc. and Tesla Inc.

AllianceBernstein thinks US earnings are unlikely to turn much positive until the fourth quarter. “It is much more likely that we will see an economic recession in the US in the next 12 months,” David Wong, chief investment strategist, said on Bloomberg Television.

While recent data suggested runaway prices were falling somewhat, a report on Friday suggested Americans are bearish. According to a University of Michigan survey, inflation expectations jumped in April as consumers expected prices to rise 4.6% on an annualized basis, versus 3.6% in March.

Among commodities, Crude Oil was little changed on Monday after posting its fourth week of gains amid signs of tightening in the global market. Gold was flat and bitcoin slipped below the $30,000 key level.

Important events this week:

• ECB President Christine Lagarde addresses the Council on Foreign Relations in New York on Monday

• The Fed’s Thomas Barkin addresses the Richmond Association for Business Economics on Monday

• China GDP, Retail Sales, Industrial Production, Tuesday

• US housing construction begins on Tuesday

• Goldman Sachs and Bank of America will release their first-quarter results on Tuesday

• The Fed’s Michelle Bowman discusses digital currencies on Tuesday

• Eurozone CPI, Wednesday

• Fed publishes Beige Book, Wednesday

• The Fed’s John Williams delivers a speech on Wednesday

• The Fed’s Austin Goolsbee will be interviewed on NPR on Wednesday

• Chinese lending rates, Thursday

• Eurozone Consumer Confidence, Thursday

• US Initial Jobless Claims, Existing Home Sales, Index of Leading Economic Indicators, Thursday

• ECB to publish report on March monetary policy meeting, Thursday

• The Fed’s Christopher Waller will speak at an event focused on cryptocurrencies on Thursday

• The Fed’s Patrick Harker speaks on “monetary policy and housing” on Thursday.

• The Fed’s Loretta Mester discusses the economic and policy outlook on Thursday

• The Fed’s Raphael Bostic discusses regional and national economic conditions on Thursday

• The Fed’s Michelle Bowman and Lorie Logan will speak at Thursday’s event

• Eurozone PMIs, Friday

• Japan CPI, Friday

• The Fed’s Lisa Cook discusses economic research at an event on Friday

Some of the key movements in the market:

Shares

• S&P 500 futures were up 0.2% as of 11:47 a.m. Tokyo time. The S&P 500 fell 0.2% on Friday

• Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.2%

• Euro Stoxx 50 futures up 0.3%

• Japan Topix Index up 0.2%

• Hong Kong’s Hang Seng index rose 0.2%

• China’s Shanghai Composite Index up 0.9%

• Australia’s S&P/ASX 200 index rose 0.2%

currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro fell 0.1% to $1.0978

• The Japanese yen was little changed at 133.88 per dollar

• The offshore yuan fell 0.1% to 6.8809 per dollar

• The Australian dollar was little changed at $0.6706

cryptocurrencies

• Bitcoin fell 1% to $30,072.14

• Ether fell 0.9% to $2,103.86

Bind

• The 10-year government bond yield was little changed at 3.51%.

• Japan’s 10-year yield rose two basis points to 0.475%

• Australia’s 10-year yield rose five basis points to 3.37%

raw materials

This story was created with the support of Bloomberg Automation.

–With the support of Vildana Hajric and Ritika Gupta.

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