Asian stocks look set to dip Monday as the risk of a slower economic recovery from the pandemic amid elevated inflation saps sentiment.
Futures fell in Japan, Australia and Hong Kong, while U.S. contracts edged up. The S&P 500 last week dropped the most since mid-June on investor caution over the challenges for economic reopening from the delta virus strain.
Treasury yields have advanced as traders assess price pressures and their impact on the likely timeline for a reduction in Federal Reserve stimulus. An update on U.S. consumer prices this week will feed into the debate about whether or not elevated costs are transient. The dollar was steady.
Trade tension is in the spotlight again after the Biden administration was said to be weighing a new probe into Chinese subsidies. Investors are also monitoring Beijing’s regulatory crackdown on private industries and the travails of indebted developer China Evergrande Group.
The ongoing march of Covid-19 even as vaccine rollouts accelerate is undermining confidence in the economic recovery and contributing to supply-shock inflation. Key central banks are also getting closer to paring pandemic-era stimulus, posing risks for financial markets.
“Risk assets will continue to struggle in the near term with weak hard data due to the delta outbreak and supply disruptions over the summer,” Barclays Plc strategists including Shinichiro Kadota wrote in a note. But the Barclays team said it is wary of turning too bearish as progress toward containing the virus will likely eventually bolster growth prospects.
Meanwhile, President Joe Biden’s $3.5 trillion tax-and-spending plan faces challenges. Democrat Senator Joe Manchin has cast doubt on the timeline for pushing Biden’s economic agenda through Congress, and proposed tax rates may be watered down to boost the chances of the package being passed.
Elsewhere, North Korea said it successfully test-fired a new type of long-range cruise missile, ratcheting up tensions on the Korean Peninsula. Oil climbed above $70 a barrel and Bitcoin was around $45,000. Epic Games Inc. filed a notice of appeal in its closely watched antitrust lawsuit against Apple Inc.
Here are some events to watch this week:
- OPEC monthly oil market report, Monday
- U.S. consumer-price index, Tuesday
- Apple product-launch event, Tuesday
- China retail sales, property prices, industrial production, Wednesday
- Quadruple witching day for U.S. markets, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.3% as of 7:48 a.m. in Tokyo. The S&P 500 fell 0.8% Friday
- Nasdaq 100 contracts were up 0.2%. The Nasdaq 100 fell 0.8%
- Nikkei 225 futures fell 0.5%
- Australia’s S&P/ASX 200 Index futures dropped 0.4%
- Hang Seng Index futures lost 0.7% earlier
- The Japanese yen traded at 109.87 per dollar
- The offshore yuan was at 6.4431 per dollar
- The Bloomberg Dollar Spot Index was little changed
- The euro was at $1.1811
- The yield on 10-year Treasuries advanced four basis points to 1.34%
- Australia’s 10-year bond yield rose four basis points to 1.26%
- West Texas Intermediate crude rose 0.5% to $70.05 a barrel
- Gold was at $1,788.42 an ounce