(Bloomberg) — Asian stocks fell Monday and U.S. equity futures rebounded as traders weighed concerns about tightening Federal Reserve monetary policy. Treasury yields edged higher and crude oil climbed.
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Shares fell in Japan, South Korea and Australia after one of the worst stretches for global shares last week since the pandemic began. Gains in S&P 500 and Nasdaq 100 contracts held out the hope of some respite. The dollar was steady.
The Fed on Wednesday is expected to signal a March liftoff in interest rates and balance-sheet reduction later this year to help fight inflation. Ebbing stimulus is forcing a rethink about the economic and market outlook.
How the policy shift will affect fixed income is among the key questions. Treasuries initially slumped at the start of last week before rallying sharply. The 10-year yield inched up toward 1.77%.
In the volatile cryptocurrency sector, bruised Bitcoin stabilized around $36,000 in the wake of a plunge over the past three days. Digital coins have shed more than $1 trillion in value since a November high.
Aside from the Fed, earnings updates from titans such as Apple Inc. will shape sentiment too following an uneven start to the reporting season. Technology stocks have borne the brunt of an equity selloff this year, while some less richly valued parts of the market have held up better.
There is “likely a longer term rotation toward value stocks measured in quarters, not weeks” unfolding, Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, wrote in a note. He added “investors should retain a balanced view, staying patient in committing new capital to equities.”
Goldman Sachs Group Inc. economists said they see a risk the Fed will tighten monetary policy more aggressively this year than the Wall Street bank now anticipates.
Speculators in Retreat
A less accommodative Fed is among the reasons why “you have a re-rating going on and certainly a bit of a — excuse the term — puking of some of the higher spec, lower quality segments of the market,” Liz Ann Sonders, chief investment strategist at Charles Schwab & Co., said on Bloomberg Television.
In China, officials are going the other way and easing policy to bolster growth. A former adviser to the nation’s central bank said a faster increase in government spending is needed as looser monetary policy won’t be sufficient.
Elsewhere, a commodities gauge remains near a record level, powered in part by a rally in oil that’s helping to stoke global economic price pressures.
Meanwhile, traders are monitoring U.S.-Russia tension over Ukraine. Russia is continuing a military buildup near the Ukrainian border but denies that it’s planning a further invasion of the nation. The U.S. ordered family members at its embassy in Kyiv to leave Ukraine.
For more market analysis, read our MLIV blog.
What to watch this week:
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Earnings reports are due from companies including Apple, Boeing, GE, 3M, Deutsche Bank, Microsoft, Samsung Electronics and Tesla
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PMIs for Eurozone, France, Germany, U.K. and Australia, Monday
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Australia CPI, Tuesday
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Federal Reserve rate decision and Chair Jerome Powell news conference, Wednesday
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Bank of Canada interest-rate decision, Wednesday
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EIA crude oil inventory report, Wednesday
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U.S. fourth-quarter GDP growth data, plus U.S. initial jobless claims and durable goods, Thursday
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U.S. consumer income, University of Michigan consumer sentiment figures, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 0.5% as of 9:18 a.m. in Tokyo. The S&P 500 fell 1.9%
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Nasdaq 100 rose 0.8%. The Nasdaq 100 fell 2.8%
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Japan’s Topix index declined 0.8%
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Australia’s S&P/ASX 200 index shed 0.4%
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South Korea’s Kospi index fell 0.6%
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Hang Seng futures lost 0.9% earlier
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was at $1.1335, down 0.1%
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The Japanese yen was at 113.79 per dollar, down 0.1%
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The offshore yuan was at 6.3415 per dollar
Bonds
Commodities
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West Texas Intermediate crude rose 0.8% to $85.85 a barrel
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Gold was at $1,833.46 an ounce, down 0.1%
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