Asian stocks and US equity futures steadied Friday while Treasuries trimmed an advance as traders weighed risks to the economic outlook such as elevated inflation and regional coronavirus flareups.
Shares fluctuated in Japan and China after coming off lows, while the Hang Seng index turned higher on Beijing’s plan to exempt companies going public in Hong Kong from seeking cybersecurity regulatory approval. European and US contracts were stable after energy and technology sectors led Wall Street lower. Moderna Inc. rallied in extended trading on an announcement that the vaccine maker is set to join the S&P 500.
Federal Reserve Chair Jerome Powell overnight defended the central bank’s accommodative stance in the face of high inflation. Officials expect a transient surge in price pressures amid the reopening from the pandemic, but some others fear stickier inflation that could hurt economic prospects. The 10-year Treasury yield edged up but is set for a third weekly retreat.
Crude oil is on course for the biggest weekly decline since mid-March, hurt by virus flareups and amid uncertainty over an OPEC+ deal to boost supply. New Zealand’s dollar jumped after the nation’s inflation breached the central bank’s target range, reinforcing bets on an interest-rate increase.
Global stocks remain near record levels but face risks such as an eventual tapering in Fed bond purchases, Covid-19 delta-variant outbreaks and some signs of peaking economic and corporate earnings momentum. Another key question is whether or not the bottlenecks stoking inflation will lead to lasting price pressures and a more constrained environment for monetary policy.
“At least for the next 12 to 18 months we’re going to be living in a period of heightened inflation pressures,” Sean Darby, global equity strategist at Jefferies, said on Bloomberg Television. “The good news is at least for the next 12 months I don’t think the profit cycle is going to pull the rug from under the feet of equity investors. It’s still a reasonable environment for equity markets to outperform other asset classes.”
Powell has said the US recovery has some way to go before the central bank can start tapering economic support and that it’s closely watching inflation. Treasury Secretary Janet Yellen said she expects “several more months of rapid inflation,” adding expectations for price gains still look well contained.
Some see a stronger case for scaling back emergency policy settings. Federal Reserve Bank of St. Louis President James Bullard urged policy makers to move forward in reducing stimulus, arguing the goal of achieving “substantial further progress” on inflation and employment has been met.
In Japan, the central bank left its main monetary policy settings unchanged. Elsewhere, the Biden administration is set to issue an advisory cautioning US companies about the risks of doing business in Hong Kong. On the virus front, Thailand reported a record number of Covid-19 cases and Singapore is weighing new restrictions.
These are some of the main moves in financial markets:
- S&P 500 futures were flat as of 5:05 a.m. in London. The S&P 500 fell 0.3%
- Nasdaq 100 futures were little changed. The Nasdaq 100 fell 0.7%
- Japan’s Topix index fell 0.1%
- Australia’s S&P/ASX 200 index was steady
- South Korea’s Kospi index retreated 0.6%
- Hong Kong’s Hang Seng index rose 0.5%
- China’s Shanghai Composite index was stable
- Euro Stoxx 50 futures were steady
- The Bloomberg Dollar Spot Index was little changed
- The euro was at $1.1810
- The Japanese yen was at 110.02 per dollar, down 0.2%
- The offshore yuan was at 6.4662 per dollar, falling 0.1%
- The yield on 10-year Treasuries rose about two basis point to 1.32%
- Australia’s 10-year bond yield was at 1.29%
- West Texas Intermediate crude was at $71.59 a barrel, down 0.1%
- Gold was at $1 827.43 an ounce, losing 0.1%