Stocks, futures mixed on renewed rate-hike worries: Markets wrap

Stocks in Asia traded mixed on fresh signs of labour-market resiliency in the US that may support another Federal Reserve hike in interest rates this year.

Shares in mainland China fluctuated, while those in Taiwan and Japan fell. Sentiment soured in the semiconductor sector after Taiwan Semiconductor Manufacturing Co. cut its sales outlook for this year.

Both the Hang Seng Index and the Kospi gauge clung to modest gains. The Chinese government earlier released some measures to support consumption, including on home appliances and car purchases, that helped prop up consumer-related stocks.

Euro Stoxx 50 futures fell, while contracts for US equities traded within a narrow range, after the tech-heavy Nasdaq 100 index dropped the most in nearly five months on Thursday. The declines in US stocks are hitting the pause button on this year’s blistering rally that’s seen the S&P 500 rise 18%, and the Nasdaq 100 gain 41%, against a shaky economic outlook during the Fed’s aggressive tightening campaign.

The dollar was little changed and Treasury yields slightly fell Friday. An unexpected pullback in weekly initial jobless claims prompted traders to price in higher odds of a quarter-point rate hike beyond the Fed’s meeting next week, boosting the dollar and yield on the 10-year Treasury Thursday.

At this point in time, it is difficult to say that the Fed has tamed inflation, according to Eugenia Fabon Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB.

“Going beyond the lower-than-expected CPI, all the other indicators are saying not only of a resilient US activity, but some of the activity indicators are even accelerating,” she said on Bloomberg Television. “There is a risk that inflationary pressures could actually re-accelerate at the end of the year if the Fed were to stop prematurely.”

The yen slipped after strengthening earlier as Japan reported inflation that was slightly higher than estimates in June. The latest data will present a challenge for Bank of Japan officials when they meet next week as Governor Kazuo Ueda continues to back the case for persistent monetary stimulus.

Expecting more stimulus

Some investors expect to see even more support measures in China at the end of the month.

“Additional stimulus measures may come through after the Politburo meeting (July 28-30), but the scale and targeted areas remain to be confirmed,” Morgan Stanley strategists, including Laura Wang, wrote in a note.

However, as more prudent and balanced consideration of policy choices could result in longer decision-making and action-taking, “we see further downward pressure on corporate earnings through the next one to two quarterly results seasons,” they said.

The offshore yuan was little changed Friday after the People’s Bank of China once again set its daily fixing for the currency at a level that was stronger than estimate.

The Bloomberg Commodity Index is set for its third weekly gain, following a surge in wheat prices after an escalation of tensions between Russia and Ukraine in the Black Sea. Natural gas futures in Europe and the US are also set to notch near 10% gains this week as extreme heat boosts power demand for air conditioning. Oil is set to eke out a fourth weekly gain while gold has retreated from a two-month high on the recent strength of the dollar.

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 6:15 a.m. London time. The S&P 500 fell 0.7%
• Nasdaq 100 futures were little changed. The Nasdaq 100 fell 2.3%
• Japan’s Topix was little changed
• Australia’s S&P/ASX 200 fell 0.2%
• Hong Kong’s Hang Seng rose 0.4%
• The Shanghai Composite was little changed
• Euro Stoxx 50 futures fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.1% to $1.1142
• The Japanese yen was little changed at 140.20 per dollar
• The offshore yuan was little changed at 7.1719 per dollar
• The Australian dollar was little changed at $0.6778
• The British pound rose 0.3% to $1.2902

Cryptocurrencies

• Bitcoin rose 0.3% to $29 838.92
• Ether rose 0.3% to $1,893.56

Bonds

• The yield on 10-year Treasuries declined one basis point to 3.84%
• Japan’s 10-year yield advanced two basis points to 0.475%
• Australia’s 10-year yield advanced seven basis points to 4.02%

Commodities

• West Texas Intermediate crude rose 0.9% to $76.34 a barrel
• Spot gold was little changed