U.S. futures plunge, stocks cut gains as bonds rise: Markets end

U.S. equity futures fell and Asian stocks pared gains on Monday as slowing economic growth and lingering inflation continued to hamper markets.

In a quiet session ahead of the US Independence Day holiday, an Asian stock index climbed but pulled away from the day’s high, S&P 500 contracts lost around 0.5% and European futures rose.

Sovereign debt extended a rally triggered by a reassessment of how central banks can raise interest rates to fight inflation as the economic expansion falters. Bonds rose in New Zealand and Australia, while Treasury futures were little changed – there is no spot trading due to the US pause.

The dollar was firm, oil fluctuated around $108 a barrel and bitcoin retreated towards the $19,000 level.

In the United States and elsewhere, signs of economic weakness are increasingly apparent in everything from personal spending to manufacturing. Investors are increasingly worried about the recession and its implications rather than focusing exclusively on elevated price pressures.

Financial markets “remain focused on the risk of a sharp downturn in the global economy,” wrote Carol Kong, strategist at Commonwealth Bank of Australia, in a note. She added that the backdrop could support the dollar this week.

In China, officials are trying to fend off a Covid surge that could rock an economically important region. It’s another test of Beijing’s strategy of trying to wipe out the pathogen with mass testing and disruptive lockdowns.

Separately, developer Shimao Group Holdings Ltd. said it failed to pay a $1 billion note that came due on Sunday, among the biggest dollar payment failures so far this year in China.

What to watch this week:

  • Australian rate decision, Tuesday
  • PMI for the euro zone, China, India among others, Tuesday
  • US factory orders, durable goods, Tuesday
  • FOMC Minutes, US PMIs, ISM Services, JOLTS Jobs, Wednesday
  • EIA Crude Oil Inventory Report, Thursday
  • Fed Governor Christopher Waller and St. Louis Fed President James Bullard are scheduled to speak on Thursday
  • ECB minutes from its June policy meeting, Thursday
  • U.S. jobs report for June, Friday

Some of the major movements in the markets:

Shares

  • S&P 500 futures fell 0.5% at 7 a.m. in London. The S&P 500 rose 1.1% on Friday
  • Nasdaq 100 futures fell 0.6%. The Nasdaq 100 rose 0.7% on Friday
  • Japan’s Topix index rose 1.3%
  • Australia’s S&P/ASX 200 index rose 1.2%
  • South Korea’s Kospi index drops 0.5%
  • Hong Kong’s Hang Seng index fell 0.4%
  • China’s Shanghai Composite index gained 0.2%
  • Euro Stoxx 50 futures rose 0.7%

Currencies

  • The Bloomberg Dollar Spot Index remained stable
  • The euro was at $1.0433, up 0.2%
  • The Japanese yen was at 135.30 to the dollar, down 0.1%
  • The offshore yuan was at 6.6926 to the dollar

Obligations

  • The yield on 10-year Treasury bills fell 13 basis points to 2.88% on Friday
  • Australia’s 10-year yield fell eight basis points to 3.53%

Goods

  • West Texas Intermediate crude rose 0.4% to $108.85 a barrel
  • Gold was at $1,812.82 an ounce, up 0.1%

© 2022 Bloomberg