Stocks Set to Dip, Treasuries Up Amid Growth Worry: Markets Wrap

Stocks Set to Dip, Treasuries Up Amid Growth Worry: Markets Wrap
Sunil Jagtiani
·3 min read

(Bloomberg) -- Asian stocks look set to follow U.S. shares lower Friday after concerns about the economic growth outlook came to the fore. Treasury yields retreated and the dollar held an advance.

Equity futures fell in Japan and Hong Kong and were steady in Australia. U.S. contracts slipped after energy and technology sectors led Wall Street lower, including a decline in growth favorites like Amazon.com Inc. Moderna Inc. rallied in extended trading on an announcement that the vaccine maker is set to join the S&P 500.

Federal Reserve Chair Jerome Powell overnight defended the central bank’s accommodative stance in the face of uncomfortably high inflation. Officials expect a transient surge in price pressures amid the reopening from the pandemic, but some others fear stickier inflation that could hurt the economic outlook. The 10-year Treasury yield slid, set for a third weekly retreat.

Crude oil dropped as the dollar strengthened and on OPEC+’s signal it may raise output soon. Gold held around a one-month high. New Zealand’s dollar jumped after the nation’s inflation breached the central bank’s target range, reinforcing bets it will start raising interest rates soon.

Global stocks remain near record levels but face risks such as an eventual tapering in Fed bond purchases, Covid-19 delta-variant outbreaks and signs of peaking economic and corporate earnings momentum.

“It’s possible that we’ve reached peak growth, but that doesn’t necessarily mean the cycle is rolling over,” said Giorgio Caputo, senior fund manager at J O Hambro Capital Management. “When you factor in those peak growth concerns, as well as what’s been going on with the delta variant and the way interest rates have been declining, it does seem like we’re having a little bit of a growth scare.”

Powell has said the U.S. recovery has some way to go before the central bank can start tapering economic support, while adding it’s closely watching inflation. Treasury Secretary Janet Yellen said she expects “several more months of rapid inflation” while adding expectations for price gains still look well contained.

Some commentators see a stronger case for scaling back emergency policy settings. Federal Reserve Bank of St. Louis President James Bullard urged policy makers to move forward in reducing stimulus, arguing the goal of achieving “substantial further progress” on both inflation and employment has been met.

Elsewhere, the Biden administration is set to issue an advisory cautioning U.S. companies about the risks of doing business in Hong Kong as China tightens its control over the island, the latest chapter in the ongoing tension between Washington and Beijing.

For more market commentary, follow the MLIV blog.

Here are some events to watch this week:

Bank of Japan interest rate decision Friday

These are some of the main moves in financial markets:

Stocks

S&P 500 futures shed 0.1% as of 8:07 a.m. in Tokyo. The S&P 500 fell 0.3%Nasdaq 100 futures declined 0.1%. The Nasdaq 100 fell 0.7%Nikkei 225 futures retreated 0.8%S&P/ASX 200 futures were little changedHang Seng futures declined 0.5%

Currencies

The Bloomberg Dollar Spot Index was steadyThe euro was at $1.1813The Japanese yen was at 109.82 per dollarThe offshore yuan was at 6.4625 per dollar

Bonds

The yield on 10-year Treasuries declined five basis points to 1.30%

Commodities

West Texas Intermediate crude was at $71.45 a barrel after falling 2%Gold was at $1,831.43 an ounce, up 0.1%

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