(Bloomberg) — U.S. stock futures struggled for direction, giving up short gains sparked by a monetary policy shift in China, as investors focused on escalating geopolitical risks and expectations of interest rate cuts in the U.S. and other major economies.
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Contracts on the Nasdaq 100 fell 0.2% and contracts on the S&P 500 fell 0.1%, after rising earlier after China announced that authorities would adopt a “somewhat loose” strategy next year. More steps on the fiscal side could be revealed at the Central Economic Work Conference on Wednesday. While Beijing’s pledge boosted Asian markets and supported US-listed Chinese stocks in pre-market trading, gains elsewhere were short-lived.
The European Stoxx 600 index also retreated from the rise, despite the advance of sectors exposed to China, including mining companies and consumer products.
“The somewhat lenient monetary policy stance by the Politburo is welcome news, although it will not fundamentally change the situation for the Chinese economy,” said Joachim Clement, head of strategy, economics, environment and governance at Panmure Librom. “What we need is significantly more fiscal stimulus supported by more flexible monetary policy.”
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Crude oil prices rose, as did gold, after the overthrow of Bashar al-Assad’s regime in Syria destabilized the already turbulent Middle East. South Korea also risks prolonging the political impasse, as opposition lawmakers push for another impeachment vote on President Yeon Suk-yul. This witnessed continued declines in the Korean markets, while the won fell by about 1% against the dollar.
In the absence of further geopolitical escalation, investors will turn their attention to central bank meetings this week. The European Central Bank, which meets for the first time since the collapse of the Paris and Berlin governments, is expected to cut interest rates, as are the Bank of Canada and the Swiss National Bank. The Australian Central Bank is likely to keep interest rates unchanged.
US inflation data will be another key event, likely determining whether the Fed will ease policy again at its December 18 meeting. While Friday’s November jobs report indicated the labor market is cooling enough to allow for interest rate cuts, the inflation reading could add to uncertainty, if it shows price pressures accelerating last month by more than the 0.3% forecast in the survey.
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