Asian stocks are set to start the week lower as investors assess whether last week’s post-Federal Reserve rotation away from the reflation trade will continue. Currencies were steady early Monday.
U.S. stocks tumbled for a fourth day on Friday after the central bank’s surprise hawkishness, and commodities such as copper slumped while the dollar touched a two-month high. The S&P 500 had its worst week since February. Bonds advanced, sending 10-year yields down around 1.44%, oil gained and gold retreated. Futures were lower in Japan, Australia and Hong Kong.
Bitcoin dropped over the weekend amid a focus on Chinese mine closures and potential regulatory scrutiny. The digital coin was trading just below $36,000 early Monday.
In a light week for economic data, traders will be paying close attention to appearances by Fed policy makers, including Chair Jerome Powell, for any guidance on winding back stimulus after the central bank struck a hawkish tone last week. Yields on shorter-maturity Treasuries jumped Friday after St. Louis Fed President James Bullard said on CNBC that the central bank has started discussing scaling back the pace of pandemic bond-buying.
“The shift towards tapering and a pull forward in first rate hikes may cause bouts of nervousness in markets with shares vulnerable to a decent correction, but note that tapering is not monetary tightening (it’s just slower easing) and rate hikes are still a fair way off in most developed countries,” Shane Oliver, head of investment strategy and chief economist at AMP Capital, said in a note.
Oil markets will be in focus after Iran failed in a sixth round of negotiations to revive a nuclear deal that would lift U.S. sanctions. The adjournment of meetings came a day after hardline cleric Ebrahim Raisi was declared the winner of Iran’s presidential election.
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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 speaker throughout the week
- European Central Bank President Christine Lagarde addresses the European Parliament Monday
- Fed Chair Jerome Powell testifies at a House Subcommittee hearing on the Fed’s pandemic emergency lending and its asset purchase programs Tuesday
- Bank of England interest rate decision Thursday
These are some of the main moves in financial markets:
- The S&P 500 fell 1.3% Friday
- The Nasdaq 100 fell 0.8%
- Nikkei 225 futures fell 1.7%
- Australia’s S&P/ASX 200 Index futures dropped 1.5%
- Hang Seng Index futures fell 0.8% earlier
- The yen was little changed at 110.25 per dollar
- The offshore yuan traded at 6.4589 per dollar
- The Bloomberg Dollar Spot Index rose 0.4% Friday, climbing for the sixth straight day
- The euro was at $1.1858
- The yield on 10-year Treasuries declined six basis points to 1.44%
- West Texas Intermediate crude rose 0.8% to $71.64 a barrel
- Gold fell 0.5% to $1,764.16 an ounce
— With assistance by Sophie Caronello