US equity futures steady; China tech saps Asia: markets wrap

Stocks in Asia fell Friday amid a drop in the Chinese technology sector and as investors evaluated economic risks from Federal Reserve monetary-policy tightening and Russia’s war in Ukraine.

MSCI Inc.’s Asia-Pacific equity gauge slipped for a second session. Tech shares in Hong Kong slid following US comments that it’s “premature” to speculate about a deal to keep Chinese firms from being kicked off American exchanges. US and European futures edged up after a jump in the S&P 500 on Thursday.

Treasuries made modest gains but remain on course for one of their worst quarterly routs since at least the early 1970s. Oil dipped after European Union leaders refrained from fresh steps to cut imports of Russian crude. The US may unveil measures to help Europe reduce flows of Russian natural gas.

Investors are continuing to grapple with the ramifications of Russia’s invasion and isolation, including elevated raw-material costs that have stoked expectations of higher inflation and more aggressive Fed interest-rate hikes.

The yen snapped a prolonged drop against the greenback that was spurred by the monetary-policy divergence between the US and a still-dovish Japan. A gauge of the dollar declined.

Global shares are set for their first consecutive weekly gains in 2022, suggesting some equity investors foresee economic growth weathering the conflict, high inflation and the Fed’s campaign against price pressures.

But key parts of the US Treasury yield curve continue to flatten or are inverted. That’s stirring debate as to whether the bond market is flagging a steep economic slowdown or even a recession ahead.

The Fed’s steps to contain inflation are “what ultimately will drive a more aggressive inversion of the curve, which we think is coming quite quickly,” Gene Tannuzzo, global head of fixed income at Columbia Threadneedle Investments, said on Bloomberg Television.

That doesn’t necessarily signal a recession, he added, since “this is a very different cycle and the first one in over 30 years where the Fed is playing catch-up to inflation.”

Fed Outlook

Chicago Fed President Charles Evans said Thursday he’s “comfortable” with raising rates in quarter-point increments, while being “open” to a 50 basis-point move if needed. The US central bank raised the benchmark rate a quarter point last week, the first increase since 2018.

While the price action in Treasuries has been brutal, that doesn’t mean the decades-long bull market in bonds is over, Carley Garner, founder of DeCarley Trading, said on Bloomberg Television.

“Inflation is the story now, but inflation has tended to be something that can change very quickly,” she said. “It spikes and then it violently and quickly reverses the other way and generally triggers a recession while we’re at it.”

Meanwhile, the Biden administration is increasingly worried that Russian President Vladimir Putin may lash out dangerously, pressured by the struggles of his military campaign and far-reaching sanctions. The US and its allies warned Putin against using biological, chemical or nuclear weapons.

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.1% as of 5:50 a.m. in London. The S&P 500 rose 1.4%
• Nasdaq 100 futures edged up 0.1%. The Nasdaq 100 rose 2.2%
• Japan’s Topix index was steady
• Australia’s S&P/ASX 200 index increased 0.3%
• South Korea’s Kospi index was steady
• China’s Shanghai Composite index shed 1.1%
• Hong Kong’s Hang Seng index slipped 2.7%
• Euro Stoxx 50 futures rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro was at $1.1029
• The Japanese yen was at 121.61 per dollar
• The offshore yuan was at 6.3753 per dollar

Bonds

• The yield on 10-year Treasuries fell one basis point to 2.36%
• Australia’s 10-year yield rose one basis point to 2.78%

Commodities

• West Texas Intermediate crude was at $112.37 a barrel
• Gold was at $1 958.70 an ounce, up 0.1%