SYDNEY, Nov 21 (Reuters) – Asian stock markets turned hesitant on Monday as investors worried about the economic fallout from new COVID-19 restrictions in China, while bonds and the dollar braced for further updates on US monetary policy.
Beijing’s most populous district urged residents to stay home on Monday as the number of COVID cases in the city rose, while at least one district in Guangzhou was locked down for five days. read more read more ]
The eruption of outbreaks across the country has been a setback to hopes for a quick easing of tough pandemic restrictions, one of the reasons cited for a 10% drop in oil prices last week.
It also pulled MSCI’s broadest non-Japan Asia-Pacific equity index (.MIAPJ0000PUS) off a two-month high, although it still finished stronger this week. Early Monday, the index was down 0.1%. The Japanese Nikkei (.N225) gained 0.3%, while South Korea (.KS11) lost 0.4%.
S&P 500 futures fell 0.2%, while Nasdaq futures fell 0.1% in quiet trading.
The Thanksgiving holiday on Thursday, combined with the distraction of the FIFA World Cup, could dampen trading, while Black Friday sales will offer some insight into consumer conditions and the outlook for retail stocks.
Minutes from the U.S. Federal Reserve’s latest meeting are due on Wednesday and could appear hawkish, judging by how officials have pushed back on market easing in recent days.
Atlanta Federal Reserve Chairman Raphael Bostic said on Saturday he was ready to return to a half-point hike in December, but also stressed that rates were likely to stay high longer than previously forecast. the steps. Read more
Futures imply a 76% chance of a 50 basis point rise to 4.25-4.5% and a peak for rates around 5.0-5.25%. They also planned rate cuts for the end of next year.
“We believe the ongoing deceleration in US inflation and European growth is producing a moderation in the pace of tightening from next month,” said Bruce Kasman, head of research at JPMorgan.
“But for central banks to pause, they also need clear evidence that labor markets are easing,” he added. “Latest reports from the US, eurozone and UK point to only limited moderation in labor demand, while wage information points to sustained pressures.”
There are at least four Fed officials due to speak this week, a teaser ahead of a speech by Chairman Jerome Powell on Nov. 30 that will set the outlook for rates at the December policy meeting.
PRICE FOR THE RECESSION
Bond markets clearly think the Fed will tighten too much and tip the economy into recession, as the yield curve is the most inverted it has been in 40 years.
On Monday, 10-year note yields of 3.84% traded 71 basis points below two-year yields.
The Fed’s chorus helped the dollar stabilize after its recent strong sell-off, although speculative positioning in futures turned sharply short on the currency for the first time since mid-2021. Read more
Early Monday, the dollar was a little weaker at 140.26 yen, following last week’s rebound from a low of 137.67. The Euro held at $1.0327, and below the recent four-month high of $1.1481.
The US Dollar Index settled at 106.900, following last week’s low of 105.300.
“Given the extent of the fall in US bond yields and the dollar over the past two weeks, we think there is a good chance that they will rebound if the Fed minutes are consistent with recent hawkish language. members,” said Jonas Goltermann, a senior markets economist at Capital Economics.
Meanwhile, the turmoil in cryptocurrencies has continued unabated with exchange FTX filing for protection in US bankruptcy court, saying it owes its 50 largest creditors nearly of $3.1 billion. Read more
In commodity markets, gold was a little firmer at $1,751 an ounce, after falling 1.2% last week.
Oil futures were trying to find a bottom after last week’s beatings saw Brent lose 9% and WTI around 10%.
Brent rose slightly 18 cents to $87.80, while U.S. crude added 10 cents to $80.18 a barrel.
Reporting by Wayne Cole; Editing by Kenneth Maxwell
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