Stocks mixed as Fed’s dovish tone saps enthusiasm: Markets wrap

(Bloomberg) – Stock futures struggled for direction at the start of the week as the dovish tone from the Federal Reserve Chairman dampened enthusiasm that inflation may have peaked.

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US stock futures fell on Monday while the European index rose, boosted by miners and automakers. Contracts in the S&P 500 were down 0.2% while contracts on the Nasdaq 100 were down 0.4%. Asian stocks wiped out their earlier gains, weighed down by Japanese stocks.

Treasury yields advanced and the dollar flipped gains after weekend comments from Federal Reserve Governor Christopher Waller that policy makers have “ways to go” before ending interest rate hikes.

Some of the world’s biggest money managers are clinging to a risk stand against the threat of entrenched inflation, even if price pressures subside. JPMorgan Asset Management has a record cash allocation in at least one of its strategies while the Hedge Fund Solutions team at UBS Group AG remains on the defensive.

“Markets were reading too much in one copy of the data, and US inflation slowed but not slow,” said Salman Ahmed, chief investment analyst at Fidelity International. “The Fed will need more data to reassess the interest rate end point.”

Read more: Wall Street executives resist easing inflation hopes

Signs of a slowdown in US inflation and prospects for a dovish sentiment on the part of the Federal Reserve had pushed the S&P 500 index into its best week since June and dampened the dollar’s strength. The November November University of Michigan preliminary poll showed that US consumer inflation expectations increased both in the short and long term while sentiment waned.

To be sure, while Waller said the hiking cycle will continue for some time, he indicated that the Fed could start considering a shift to 50 basis points at the next meeting in December or the one after.

Investors will also be wary watching the G20 summit in Indonesia, where US President Joe Biden and Chinese leader Xi are expected to meet. Biden’s hand has been strengthened by the Democrats’ defiance of political expectations and historical trends to maintain control of the Senate.

Shares of Chinese developers and dollar bonds extended a rally on Monday, spurred by Beijing’s property rescue measures, and with the easing of Covid controls raising hopes that the worst may be over.

Cryptocurrencies fluctuated while the sector remained under pressure amid the escalating FTX problems. The rapid decline in the value of FTX’s main crypto assets and the unauthorized withdrawal of funds after filing for bankruptcy mean that clients have little chance of recovering many of their deposits.

Oil fell after a two-day rally as a strong dollar offset optimism about prospects for improving Chinese demand. Gold fell.

This week’s main events:

  • US President Joe Biden will meet with Chinese President Xi Jinping on the sidelines of the G20 Summit on Monday

  • The Moderates Committee of the Federal Reserve, John Williams, on Monday

  • China retail sales, industrial production, jobless survey, Tuesday

  • Former US President Donald Trump plans to make an announcement, Tuesday

  • US Manufacturing Empire, Producer Price Index, Tuesday

  • US business inventories, cross-border investment, retail sales, industrial production, Wednesday

  • Fed John Williams, Lyle Brainard, and Securities and Exchange Commission Chairman Gary Gensler speak on Wednesday

  • European Central Bank President Christine Lagarde speaks, Wednesday

  • Eurozone CPI, Thursday

  • US housing starts, initial jobless claims, Thursday

  • Fed’s Neil Kashkari and Loretta Mester speak, Thursday

  • American Conference Board Leading Indicator, Existing Home Sales, Friday

Some of the main movements in the markets:

Stores

  • The Stoxx Europe 600 was up 0.4% as of 8:21 a.m. London time

  • S&P 500 futures fell 0.2%.

  • Nasdaq 100 futures fell 0.4%

  • Futures contracts on the Dow Jones Industrial Average changed little

  • The MSCI Asia Pacific Index is up 0.1%.

  • MSCI Emerging Markets Index up 0.6%

coins

  • Bloomberg spot dollar index up 0.1%

  • The euro changed little at 1.0345 dollars

  • The Japanese yen fell 0.5% to 139.46 per dollar

  • The offshore yuan rose 0.9 percent to 7.0285 per dollar

  • The British pound fell 0.2% to $1.1812

Cryptocurrency

  • Bitcoin rose 2.8% to $16,831.24

  • Ether rose 4% to $1,265.21

bonds

  • The 10-year Treasury yield advanced seven basis points to 3.89%.

  • The 10-year bond yield in Germany was little changed at 2.17%.

  • The UK 10-year bond yield advanced one basis point to 3.37%.

goods

  • Brent crude rose 0.4 percent to $96.41 a barrel

  • Spot gold fell 0.4 percent to $1,764.40 an ounce

This story was produced with the help of Bloomberg Automation.

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