Stocks Mixed in Cautious Trading; Dollar Edges Up: Markets Wrap

(Bloomberg) — Asian stocks were mixed and U.S. and European stock futures rose slightly in a cautious start to trading on Monday as investors weigh the prospect of higher interest rates and an economic slowdown. Dollar gained.

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Stocks rose in Japan and Australia while volatile stocks in Hong Kong rose in Shanghai after the People’s Bank of China kept its key lending rate unchanged and made its lowest net injection of liquidity since November.

S&P 500 futures rose 0.2%, those for the Euro Stoxx 50 added about the same amount and those for the Nasdaq 100 were little changed. The S&P 500 rose 0.8% last week and the Nasdaq 100 gained 0.1% as sensitive technology names such as Microsoft Inc. and Apple Inc. to the technological scale. Swaps traders have raised their bets on a rate hike by June and prices are suggesting a quarter point increase is better than the three out of four odds for May.

The dollar advanced slightly against the major currencies. Treasury yields were little changed, with interest rate-sensitive Treasury yields hovering at around 4.1% on Monday. It was pushed higher last week by a measure of retail sales for March which showed core readings falling less than expected and comments from Fed officials. Government bond yields in Australia and New Zealand rose in early trade.

Looking ahead this week, investors await the release of the Fed’s “Beige Book” and comments from officials including John Williams, Rafael Bostick, Loretta Meester and Lisa Cook. Markets were rocked last week after Federal Reserve Chairman Christopher Waller said he favored more policy tightening in the central bank’s battle with inflation.

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Traders raised their bets on at least one rate hike from the Federal Reserve this year as concerns about the banking sector receded and inflationary pressure remained in the US.

“I don’t think all of the rate increases have made their way through the system and it looks like the Fed will continue to tighten,” Frances Stacy, director of strategy at Optimal Capital Advisors, said on Bloomberg TV. “I don’t think we’re completely out of the woods yet, but that doesn’t mean the risk is going to happen overnight, but when something does happen, the markets can drop significantly.”

Much of the focus in Asia will be on China and the strength of its economic recovery. Figures on Tuesday are expected to show gross domestic product grew by 3.9% in the first quarter from a year earlier, well below the government’s full-year growth target of around 5%. March data may show an increase in industrial production, investment and retail sales.

In Japan, stocks of security companies rose after Prime Minister Fumio Kishida was targeted with an explosive device at an event he attended in central Japan, weeks before he hosted world leaders at the summit of the Group of Seven major industrialized nations. There was no noticeable impact on the broader Japanese markets.

Financials outperformed last week with the leadership of JPMorgan Chase & Co. and Citigroup Inc.

Investors will be looking for healthy signs from Schwab, which has fallen nearly 40% this year as higher interest rates have sent a spike in unrealized losses at brokerages. Bank of America Corp. and Goldman Sachs Group Inc. will report later this week, as will Netflix Inc. and Tesla Inc.

AllianceBernstein considers it unlikely that earnings will turn strongly positive in the US by the fourth quarter. “It is very likely that we will experience a recession in the United States within the next 12 months,” David Wong, a senior investment analyst, said on Bloomberg TV.

And while recent data indicated that runaway prices were somewhat moderating, a report released on Friday indicated that Americans are pessimistic. Inflation expectations jumped in April, as consumers saw prices rise 4.6% year over year, up from 3.6% in March, according to a University of Michigan survey.

In commodities, the price of crude oil was little changed on Monday after posting its fourth week of gains amid signs of a tightening global market. Gold was flat and Bitcoin fell below the key $30,000 level.

Main events this week:

• European Central Bank President Christine Lagarde speaks at the Council on Foreign Relations in New York, on Monday

• The Fed’s Thomas Parkin speaks before the Richmond Association for Business Economics, Monday

• China GDP, retail sales, industrial production, Tuesday

• Residences begin in the US, Tuesday

• Goldman Sachs and Bank of America released first-quarter earnings, Tuesday

• Fed’s Michelle Bowman discusses digital currency, Tuesday

• Eurozone CPI, Wednesday

• The Fed releases the Beige Book, Wednesday

• John Williams of the Federal Reserve will deliver a speech on Wednesday

• Fed’s Austin Goolsby in an interview on National Public Radio, Wednesday

• The main interest rates on Chinese loans, Thursday

• Eurozone Consumer Confidence, Thursday

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

• The European Central Bank releases a report on its March policy meeting, Thursday

• Fed’s Christopher Waller speaks at a cryptocurrency-focused event, Thursday

• Federal Reserve Chairman Patrick Harker speaks on “Monetary Policy and Housing,” Thursday

• Fed’s Loretta Mester will discuss the economic and political outlook on Thursday

• Federal Reserve Chairman Rafael Bostick discusses regional and national economic conditions, Thursday

• Fed’s Michelle Bowman and Lori Logan speak at the event on Thursday

• PMIs for the Eurozone, Friday

• Japanese CPI, Friday

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

Some of the major movements in the market:

Stores

• 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 have changed little. The Nasdaq 100 fell 0.2%.

• Futures on the Euro Stoxx 50 rose 0.3%.

• Japan’s Topix rose 0.2%.

• Hong Kong’s Hang Seng rose 0.2%.

• China’s Shanghai Composite Index rose 0.9%.

• Australia’s S&P/ASX 200 rose 0.2%

currencies

• The Bloomberg Spot Dollar Index rose 0.1%.

• The euro fell 0.1 percent to $1.0978

• The Japanese yen was little changed at 133.88 per dollar

• The offshore yuan fell 0.1 percent to 6.8809 per dollar

• The Australian dollar was not changed much at $0.6706

Digital currencies

• Bitcoin fell 1% to $30,072.14

• Ether fell 0.9% to $2,103.86

bonds

• The yield on the 10-year Treasury note was little changed at 3.51%.

• The yield on 10-year Japanese bonds rose 2 basis points, to 0.475%.

• The 10-year Australian bond yield advanced five basis points to 3.37%.

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This story was produced with help from Bloomberg Automation.

— with assistance from Vildana Hajric and Ritika Gupta.

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