Momentum in commodity markets slips after huge gains

Stocks are set to start the week firmer in Asia, as easing commodity prices and slightly softer US data allay investor concerns about excessive inflation.

Futures rose in Japan, Australia and Hong Kong. The main threat to a renewed rally is the latest series of lockdowns in the region to curb spiking coronavirus cases. US futures edged higher. Stocks ended in the green Friday after gathering price pressures pushed equity markets globally to their worst weekly loss since February.

Treasury yields declined Friday after a report showed the recent surge in US retail sales stalled in April. The dollar dropped against its major peers. Currencies were steady in early Asia trading.

The momentum in commodity markets seems to have flagged after breakneck gains, with iron ore extending a decline from record highs amid efforts by China to clamp down on surging prices. Oil edged up.

Concerns that policymakers will have to pull back support sooner than expected to quell rising inflation have weighed on global equities. Investors this week will parse the minutes from the US Federal Reserve’s federal open market committee’s latest meeting for any discussion about accelerating price pressures, and hints of a timeline for reducing asset purchases.

“Record highs in copper prices and fears over extended oil price gains will be hard to ignore” heading into the second half of the year, wrote Eric Robertsen, global head of research at Standard Chartered. “The Fed believes this is part of the economic reopening narrative, and for now, it is likely let the dust settle. But it might start looking over its shoulder if prices stay high.”

The Federal Reserve’s policy is in a good place right now, said Cleveland Fed president Loretta Mester, while playing down data that she warns will be volatile as the economy reopens. Fed vice-chair Richard Clarida and Atlanta Fed president Raphael Bostic are due to speak this week.

Bitcoin fell to the lowest since February after Elon Musk implied on Twitter Sunday that Tesla may sell or has sold its cryptocurrency holdings. The digital coin dipped below $45,000 for the first time in almost three months before paring losses.

Here are some key events this week:

• China releases industrial production, retail sales data on Monday
• Reserve Bank of Australia publishes minutes of its latest meeting Monday
• Fed vice-chair Richard Clarida and Atlanta Fed president Raphael Bostic are among policymakers speaking this week
• The Fed publishes minutes from its April meeting Wednesday, which may provide clues to officials’ views on the recovery and how they define “transitory” when it comes to inflation
• Australia releases employment data for April on Thursday

These are some of the main moves in markets:

Stocks

• S&P 500 futures were up 0.2% as of 7.20am in Tokyo. The S&P 500 rose 1.5%
• Nasdaq 100 contracts were 0.3% higher. The Nasdaq 100 rose 2.2%
• Nikkei 225 futures rose 1%
• Australia’s S&P/ASX 200 Index futures added 0.7%
• Hong Kong’s Hang Seng index futures rose 0.7% earlier

Currencies

• The Bloomberg Dollar Spot Index fell 0.4% Friday
• The euro was at $1.2150
• The yen traded at 109.36 per dollar

Bonds

• The yield on 10-year treasuries declined three basis points to 1.63% Friday

Commodities

• West Texas Intermediate crude rose 0.2% to $65.51 a barrel
• Gold was steady at $1,844.89

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