(Bloomberg) — U.S. equity futures climbed on Monday as markets regained a measure of calm following a sell-off in Asia spurred by the Federal Reserve’s surprise hawkishness.
Contracts on the S&P 500 advanced with European stocks after Asian markets slumped by the most since May, with the Nikkei 225 down 4% at one point. Speculation that faster-than-expected policy tightening by the Fed will sink the reflation trade had sparked caution across risk assets. The 30-year Treasury yield briefly dropped below 2% for the first time since February.
But the risk-off mood faded throughout the European session, and cyclical stocks sensitive to economic conditions outperformed defensive shares. The 30-year yield turned higher and a dollar gauge dropped. WTI crude oil traded around $72 a barrel.
Traders will be paying close attention to this week’s appearances by Fed policy makers, including Chair Jerome Powell, for more guidance on a possible timeline for tapering asset purchases. Last week, officials sped up their expected pace of policy tightening amid optimism about the labor market and heightened concerns over price pressures in the recovery from the pandemic.
“We have another possibly two years before the Fed starts to take action,” John Woods, Asia Pacific chief investment officer at Credit Suisse Group AG, said on Bloomberg Television. “So I do anticipate there will be a period of choppy, sideways trading as the volatility associated with this debate in the Fed is reflected in pricing, but absolutely I take the view that yields will tick a little higher.”
Elsewhere, cryptocurrencies fell back, hurt by a general worsening of investor sentiment as well as China’s ongoing crackdown on Bitcoin mining and the prospect of tighter regulations elsewhere.
For more market commentary, follow the MLIV blog.
Here are some events to watch this week:
St. Louis Fed President James Bullard, Dallas Fed President Robert Kaplan and New York Fed President John Williams are among Fed speakers, as traders weigh up the central bank’s messaging shift, which has the potential to whiplash assetsEuropean Central Bank President Christine Lagarde addresses the European Parliament MondayFed Chair Jerome Powell testifies at a House Subcommittee hearing on the Fed’s pandemic emergency lending and its asset purchase programs TuesdayBank of England interest rate decision Thursday
These are some of the main moves in financial markets:
Stocks
Futures on the S&P 500 rose 0.4% as of 8:26 a.m. New York timeFutures on the Nasdaq 100 rose 0.2%Futures on the Dow Jones Industrial Average rose 0.6%The Stoxx Europe 600 rose 0.3%The MSCI World index fell 0.2%
Currencies
The Bloomberg Dollar Spot Index fell 0.1%The euro rose 0.2% to $1.1886The British pound rose 0.5% to $1.3875The Japanese yen was little changed at 110.16 per dollar
Bonds
The yield on 10-year Treasuries advanced two basis points to 1.46%Germany’s 10-year yield advanced one basis point to -0.19%Britain’s 10-year yield advanced one basis point to 0.76%
Commodities
West Texas Intermediate crude was little changedGold futures rose 0.6% to $1,778.90 an ounce
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