Stocks mixed as Fed’s cautious tone saps excitement: Market recap

(Bloomberg) – Equity futures struggled to find their bearings early in the week as a cautious tone from a Fed speaker tempered elation that inflation may have peaked.

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U.S. stock futures fell on Monday as a European benchmark rose, buoyed by miners and automakers. Contracts on the S&P 500 fell 0.2% while those on the Nasdaq 100 slipped 0.4%. Asian stocks erased earlier gains, dragged down by Japanese stocks.

Treasury yields rose and the dollar returned to a gain after Federal Reserve Governor Christopher Waller’s weekend comments that policymakers had ‘some way to go’ before ending rate hikes of interest.

Some of the world’s biggest fund managers cling to risk positioning amid the threat of entrenched inflation, even as price pressures ease. JPMorgan Asset Management has a record cash allocation in at least one of its strategies while a hedge fund solutions team from UBS Group AG remains defensive.

“Markets have read too much into a single data printout, US inflation has slowed but it’s not slow,” said Salman Ahmed, chief investment strategist at Fidelity International. “The Fed will need more data to reassess the endpoint for rates.”

Read more: Wall Street managers push back inflation hopes

Signs of slowing US inflation and the prospect of a dovish Fed tilt had propelled the S&P 500 to its best week since June and undermined dollar strength. November’s preliminary survey from the University of Michigan showed on Friday that US consumers’ inflation expectations rose in the short and long term as sentiment fell.

Of course, while Waller said the up cycle would continue for some time, he noted that the Fed might start looking at a 50 basis point cut at the next meeting in December or the one after.

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Investors will also keep a close eye on the G20 summit in Indonesia, where US President Joe Biden and Chinese leader Xi are expected to meet. Biden’s hand has been bolstered by Democrats defying political forecasts and historical trends to retain control of the Senate.

Chinese developer stocks and dollar bonds extended their rally on Monday, driven by Beijing’s property bailouts and as the easing of Covid controls raised hopes that the worst may be over.

Cryptocurrencies fluctuated as the sector remained under pressure amid growing FTX woes. A rapid fall in the value of FTX’s key crypto assets and unauthorized fund withdrawals after its bankruptcy filing suggest customers are unlikely to recover much of their deposits.

Oil fell after a two-day rally as a stronger dollar offset optimism around the outlook for improving Chinese demand. Gold went down.

Key events this week:

• US President Joe Biden plans to meet Chinese President Xi Jinping on the sidelines of the G-20 on Monday

• The Fed’s John Williams panel of moderators on Monday

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

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

• Making America’s Empire, PPI, Tuesday

• U.S. business stocks, cross-border investment, retail sales, industrial production, Wednesday

• Fed’s John Williams, Lael Brainard and SEC Chairman Gary Gensler speak Wednesday

• ECB President Christine Lagarde speaks on Wednesday

• Eurozone CPI, Thursday

• US housing starts, first jobless claims, Thursday

• Fed’s Neel Kashkari and Loretta Mester speak Thursday

• US Conference Board leading index, existing home sales, Friday

Some of the major movements in the markets:

Shares

• The Stoxx Europe 600 rose 0.4% at 8:21 a.m. London time

• S&P 500 futures fell 0.2%

• Nasdaq 100 futures fell 0.4%

• Dow Jones Industrial Average futures are little changed

• The MSCI Asia-Pacific index rose 0.1%

• The MSCI Emerging Markets Index rose 0.6%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro was little changed at $1.0345

• The Japanese yen fell 0.5% to 139.46 per dollar

• The offshore yuan rose 0.9% to 7.0285 to the dollar

• The British pound fell 0.2% to $1.1812

Cryptocurrencies

• Bitcoin rose 2.8% to $16,831.24

• Ether rose 4% to $1,265.21

Obligations

• The yield on 10-year Treasury bills rose seven basis points to 3.89%

• Germany’s 10-year yield was little changed at 2.17%

• The UK 10-year yield rose one basis point to 3.37%

Goods

• Brent rose 0.4% to $96.41 a barrel

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

This story was produced with assistance from Bloomberg Automation.

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