(Bloomberg) — US stock futures rose and Treasuries fell after a deal was reached on the weekend to avoid an American government shutdown. Traders are waiting to hear remarks from Federal Reserve Chief Jerome Powell later Monday.
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Futures on the S&P 500 jumped as much as 0.7% in early Asia trade after US lawmakers Saturday passed compromise legislation to keep the government running until Nov. 17. Asia’s stock benchmark erased earlier gains, while European equity futures edged lower. A number of Asian markets, including China, were shut for holidays.
“Financial markets were bracing for a shutdown, so there’s an element of relief, but it’s only a temporary lifting of one of the clouds hanging over the markets now,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “Interest rates and Fed hawkishness remain the name of the game and the main driver of the markets over the next few weeks.”
Powell will take part in a roundtable discussion in Pennsylvania, along with Philadelphia Fed President Patrick Harker. US manufacturing activity and jobs data will also be in the spotlight this week after the head of the New York Fed said Friday policymakers should leave interest rates high for some time.
Treasuries dropped after the US government shutdown was averted, returning their focus to the path ahead for interest rates. US 10-year yields rose four basis points to 4.61%, while their five-year peers climbed by a similar amount to 4.64%. The dollar strengthened versus all its Group-of-10 peers.
“The higher-for-longer rates, the tighter fiscal policy going forward, the higher bond yields, at least in the short term, will all come to roost and impact the economy and cause a slowdown,” and a US recession probably in the first half of 2024, Vasu Menon, managing director of investment strategy at Oversea-Chinese Banking Corp., said on Bloomberg Television.
The Bank of Japan said it will conduct additional buying operation for government bonds on Wednesday. Ten-year bond futures trimmed losses on the news, while the yen held earlier declines.
Japan’s government bonds slipped and stocks were boosted after Japan’s quarterly Tankan survey showed confidence among large manufacturers picked up more than expected, and a summary of the central bank’s policy meeting last month showed signs that officials were more positive about considering revising policy.
Gains in US stock futures on the first trading day of October may put a temporary stay on a torrid period for global financial markets. Elevated interest rates made the July-to-September quarter the worst for MSCI’s all-country equity index since September 2022 as surging oil prices added fears over inflation and slowing economic growth.
Elsewhere, oil rose on speculation global demand is running ahead of supply.
Key events this week:
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China has week-long holiday
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Bank of England policy maker Catherine Mann speaks on monetary policy, Monday
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Fed Chair Jerome Powell and Philadelphia Fed President Patrick Harker participate in a roundtable discussion, Monday
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New York Fed President John Williams moderates discussion on climate risk, Monday
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Cleveland Fed President Loretta Mester speaks on economic outlook, Monday
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US ISM manufacturing index, Monday
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Australia rate decision, Tuesday
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Atlanta Fed President Raphael Bostic speaks on economic outlook and inflation, Tuesday
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August US JOLTS report, Tuesday
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Eurozone services and composite PMIs, Wednesday
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ECB President Christine Lagarde gives welcome address at conference, Wednesday
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US ISM services index, Wednesday
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France industrial production, Thursday
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BOE Deputy Governor Ben Broadbent, Riksbank First Deputy Governor Anna Breman participate at panel discussion, Thursday
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San Francisco Fed President Mary Daly speaks at the Economic Club of New York, Thursday
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Germany factory orders, Friday
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September US nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 0.5% as of 6:30 a.m. London time. The S&P 500 fell 0.3% on Friday
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Nasdaq 100 futures rose 0.7%. The Nasdaq 100 was little changed
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Euro Stoxx 50 futures fell 0.4%
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Japan’s Topix index rose 0.1%
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Australia’s S&P/ASX 200 Index fell 0.2%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro was little changed at $1.0566
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The Japanese yen fell 0.2% to 149.74 per dollar
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The offshore yuan fell 0.2% to 7.3058 per dollar
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The Australian dollar fell 0.5% to $0.6402
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The British pound fell 0.1% to $1.2184
Cryptocurrencies
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Bitcoin rose 3.6% to $28,080.54
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Ether rose 3.1% to $1,725.79
Bonds
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The yield on 10-year Treasuries advanced four basis points to 4.61%
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Japan’s 10-year yield advanced one basis point to 0.775%
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Australia’s 10-year yield advanced three basis points to 4.49%
Commodities
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West Texas Intermediate crude rose 0.2% to $90.94 a barrel
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Spot gold fell 0.3% to $1,842.56 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess and Joanna Ossinger.
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