Stocks Pressured by Risks From Elevated Inflation: Markets Wrap
2022.05.12 08:28
Stocks Pressured by Risks From Elevated Inflation: Markets Wrap
(Bloomberg) — A selloff in stocks may continue in Asia Thursday after elevated US inflation data bolstered the case for aggressive monetary-policy tightening and sparked a slide on Wall Street.
Futures fell for Japan, Australia and Hong Kong. US contracts stabilized in early Asian trading after the S&P 500 sank to the lowest since March 2021 and the technology-heavy Nasdaq 100 shed about 3%.
The Treasury curve flattened on bets that Federal Reserve monetary tightening will trigger an economic slowdown. The 10-year US yield declined to 2.92%. A dollar gauge was little changed. Oil rallied on plunging US fuel inventories.
In foreign-exchange markets, Hong Kong intervened after the city’s currency fell to the weak end of its trading band. Digital tokens cratered, victims of ebbing liquidity and evaporating demand for speculative assets. Bitcoin is down over 15% this week.
US inflation moderated but topped expectations at 8.3%, signaling persistent price pressures. Traders raised bets the Fed will roll out another half-point interest-rate hike in September — following similar increases in June and July. Russia’s war in Ukraine and China’s Covid lockdowns are creating shortages and stoking costs.
For equities, “we’re seeing the beginning of the capitulation and the great reset, if you want, in pricing,” Virginie Maisonneuve, global chief investment officer for equity at Allianz (ETR:ALVG) Global Investors UK, said on Bloomberg Television. “Right now the big question is peak inflation.”
Fed officials appear to be sticking with their approach of raising rates by a half point at each of their next two meetings. But Fed Bank of Atlanta President Raphael Bostic said he’s open to boosting borrowing costs to restrict economic growth if inflation persists at elevated levels.
In China, Premier Li Keqiang urged officials to use fiscal and monetary policies to stabilize employment and the economy. Covid outbreaks there are sapping growth and snarling global supply chains.
Here are key events to watch this week:
- San Francisco Fed President Mary Daly speaks, Thursday
- US PPI, initial jobless claims, Thursday
- University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were steady as of 7:19 a.m. in Tokyo. The S&P 500 fell 1.7%
- Nasdaq 100 futures were little changed. The Nasdaq 100 fell 3.1%
- Nikkei 225 futures fell 1.2%
- Australia’s S&P/ASX 200 Index futures lost 0.5%
- Hang Seng Index futures fell 1.9%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was at $1.0512
- The Japanese yen was at 129.96 per dollar
- The offshore yuan was at 6.7615 per dollar
Bonds
- The yield on 10-year Treasuries declined seven basis points to 2.92%
Commodities
- West Texas Intermediate crude was at $105.64 a barrel
- Gold was at $1,851.82 an ounce
©2022 Bloomberg L.P.
