US Futures Fall, Stocks Mixed on Fed, China Beware: Markets Rewind

(Bloomberg) — U.S. stock futures fell and Asian stocks were mixed on Monday, stymied by challenges swirling around China and a reminder by Federal Reserve officials that their main goal is to fight high inflation .

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The S&P 500 and Nasdaq 100 futures were down about 0.5 percent, while stock markets in Japan, South Korea and Australia made modest gains. The attention follows the best month for global shares since 2020, which offset their 16% fall this year.

The dollar was flat, oil was down and Bitcoin was down. Treasuries slipped, leaving the 10-year yield at 2.67%, well below June’s peak near 3.50%.

Recent data and developments have underscored the economic and regulatory challenges facing China, including a surprise contraction in factory activity that proved the cost of Beijing’s preference for mobility restrictions to tackle Covid.

On Friday, Alibaba Group Holding Ltd. plunged in Wall Street trading after it was added to a list of companies facing delisting from the US for failing to provide access to audits. This pushed the Nasdaq Golden Dragon China index lower.

Meanwhile, Fed Bank of Minneapolis President Neel Kashkari said Sunday that the central bank is committed to achieving its long-term inflation target of 2 percent. Before that, Fed Bank of Atlanta President Raphael Bostic said the monetary authority should go further to raise borrowing costs.

The slowing economy has dampened expectations about the scale of Fed rate hikes needed to tame high inflation, sparking a rally in July in both stocks and bonds. But officials may be wary of market rallies that ease economic conditions and thus jeopardize the goal of curbing demand to combat price pressures.

“Markets want to trade off the ‘high interest rate’ narrative, which has given risk assets some breathing room,” wrote Eric Robertson, chief strategist at Standard Chartered Bank Plc. He expects some “short coverage of the underweight exposure” in August, but warned that investors need to digest a lot of data, including inflation readings, ahead of the Fed’s next meeting in September.

In China, property woes remain another obstacle. Sales to top developers fell and China Evergrande Group did not deliver a preliminary restructuring plan by the end of July as promised.

Elsewhere, investors are watching US House Speaker Nancy Pelosi’s trip to Asia. A statement from her office omitted any mention of a possible stop in Taiwan. A visit could inflame US-China tension over the island.

What to watch this week:

  • Airbnb, Alibaba, BP and HSBC are among those reporting gains

  • PMIs from the US, China and the Eurozone, among others, on Monday.

  • US manufacturing spending, ISM manufacturing, Monday.

  • Reserve Bank of Australia rate decision, Tuesday.

  • US JOLTS job openings, Tuesday.

  • Chicago Fed President Charles Evans and St. Louis Fed President James Bullard are scheduled to speak at separate events on Tuesday.

  • OPEC+ meeting on production, Wednesday.

  • US factory orders, durable goods, ISM services, Wednesday.

  • BOE rate decision, Thursday.

  • Initial US jobless claims, trade, Thursday.

  • Cleveland Fed President Loretta Mester is scheduled to speak on Thursday.

  • US jobs report for July, Friday.

Some of the main movements in the markets:

inventories

  • S&P 500 futures were down 0.3% at 9:30 a.m. in Tokyo. The S&P 500 rose 1.4% on Friday

  • Nasdaq 100 futures fell 0.4%. The Nasdaq 100 rose 1.8% on Friday

  • Japan’s Topix rose 0.3%

  • South Korea’s Kospi was steady

  • Australia’s S&P/ASX 200 rose 0.4%

  • Hang Seng futures were down 0.3 percent earlier

currency

  • The Bloomberg Dollar Spot index was flat

  • The euro was at $1.0223

  • The Japanese yen was at 133.01 per dollar, up 0.2%

  • The offshore yuan was at 6.7513 per dollar

Bindings

Goods

  • West Texas Intermediate crude was at $97.97 a barrel, down 0.7%.

  • Gold was at $1,763 an ounce, down 0.2%

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