Asian equities are poised for a mixed opening as traders continue to look for clues of any breakthrough in Washington’s stagnant negotiations to avert a US default.
While Japan and Hong Kong futures pointed to early gains, Australian stocks were set to open flat. That’s after the US stock market traded in a tight range, with equities making small gains ahead of a meeting between President Joe Biden and House Speaker Kevin McCarthy. Both factions have been sending mixed signals, while Treasury Secretary Janet Yellen reiterated her department could run out of cash as soon as June 1 unless Congress raises or suspends the federal debt limit.
In Asia, investors will be watching for signs that the move by China’s central bank to inject more long-term liquidity into the financial system for the sixth month may finally deliver a post-pandemic boost to economic growth. The mood is different in Japan, with Goldman Sachs Group Inc. saying solid fundamentals and expectations for structural changes “justify a bullish stance” on the nation’s equities, as the Topix approaches its highest level since August 1990.
Meanwhile, the Reserve Bank of Australia is due to release minutes of its May interest rate meeting, which may offer new clues on the nation’s interest-rate path as much of the developed world continues to battle high inflation. Australian bonds fell in early trading.
US stocks fell earlier Monday as data showed New York manufacturing plunged the most since April 2020. This week’s figures will likely underscore more economic weakness, emboldening the Fed’s dovish voices even though inflation has failed to reassure, according to Anna Wong at Bloomberg Economics. Two Federal Reserve officials indicated they favored pausing rate hikes.
Results from retailers such as giant Walmart Inc. will also be highly scrutinized over the next few days.
“There is little conviction on either side as the market continues to digest earnings, a slew of economic data, and finger-pointing in Washington regarding the debt ceiling discussions,” said Craig Johnson, chief market technician at Piper Sandler.
To Chris Larkin at E*Trade from Morgan Stanley, it’s fair to ask whether the low equity volatility suggests the market is being too complacent — especially after the S&P 500 notched its narrowest non-holiday weekly range since August 2021.
“A debt default may not be the most likely scenario, but any prolonged debate or unexpected development has the potential to trigger higher volatility,” he noted.
JPMorgan Chase & Co.’s Marko Kolanovic joined a chorus of Wall Street strategists Monday in warning that the US debt-ceiling impasse is yet another headwind threatening the outlook for equity markets.
Morgan Stanley’s Mike Wilson delivered a similar warning on the debt-ceiling deadline, noting the bank’s clients said the issue is unlikely to be resolved without some near-term volatility. Meanwhile, BlackRock Investment Institute’s Jean Boivin and Wei Li said they expect a potential debt showdown to trigger renewed volatility.
Key events this week:
- China retail sales, industrial production, Tuesday
- Eurozone GDP, Tuesday
- US retail sales, industrial production, business inventories, Tuesday
- Fed speakers include Cleveland’s Loretta Mester, New York’s John Williams, Atlanta’s Raphael Bostic and Chicago’s Austan Goolsbee, Tuesday
- Eurozone CPI, Wednesday
- BOE Governor Andrew Bailey delivers keynote speech, Wednesday
- US housing starts, Wednesday
- US initial jobless claims, Conference Board leading index, existing home sales, Thursday
- Japan CPI, Friday
- ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday
- New York Fed’s John Williams speaks at monetary policy research conference in Washington; Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday
Some of the main moves in markets:
Stocks
- Hang Seng futures rose 1.1.% as of 8:17 a.m. Tokyo time
- Nikkei 225 futures rose 0.6%
- S&P/ASX 200 futures were little changed
- S&P 500 futures were little changed; the S&P 500 rose 0.3% Monday
- Nasdaq 100 futures were little changed; the Nasdaq 100 rose 0.5%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0876
- The British pound rose 0.6% to $1.2530
- The Japanese yen was little changed at 136 per dollar
- The offshore yuan was little changed at 6.9615 per dollar
Cryptocurrencies
- Bitcoin fell 0.2% to $27,303.59
- Ether fell 0.2% to $1,822.76
Bonds
- The yield on 10-year Treasuries advanced four basis points to 3.5%
- Australia’s 10-year yield advanced four basis points to 3.47%
Commodities
- West Texas Intermediate crude rose 0.5% to $71.43 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
