(Sept 17): Asian stocks looked set for a steady open Friday as traders weighed risks from China to the global recovery. Treasury yields rose and the dollar stayed higher following surprise strength in U.S. retail sales.
Futures edged up in Japan and Hong Kong but dipped in Australia, while S&P 500 and Nasdaq 100 contracts slipped. U.S. stocks closed mostly lower after swinging between gains and losses ahead of Friday’s quarterly expiration of options and futures, which can trigger volatility.
U.S. retail sales rose unexpectedly in August, easing some of the worries over the impact of the delta variant and highlighting the case for the Federal Reserve to begin paring stimulus. Jobless claims increased, likely reflecting volatility in weekly data as the labor market broadly recovers.
Traders are monitoring the debt crisis at developer China Evergrande Group for signs of wider contagion in the world’s second-largest economy. Beijing’s regulatory crackdown spanning technology to gambling again hurt a gauge of U.S.-listed Chinese shares as well as casino operators with exposure to Macau.
Global equities are on course for a second weekly drop, subdued by the impact of the delta strain on economic reopening, the implications of elevated inflation and the upheavals in China. The Fed’s policy meeting next week is another possible source of volatility as traders await more clues about the time-line for paring bond purchases and eventually hiking interest rates.
“Investors just should be prepared for the fact that returns are much more likely to be muted over the next five years than what we’ve really benefited and enjoyed over the last five,” Jim McDonald, Northern Trust Bank chief investment strategist, said on Bloomberg Television. That outlook incorporates the prospect of lower valuations over time for Chinese firms facing more government involvement, he said.
Oil was steady, while iron ore’s losing streak threatens to push futures back below US$100 a ton on declining Chinese steel output. Gold and silver held drops. An index of commodity prices slipped but remains in sight of a record hit in 2011, underscoring the inflation concerns rippling through the world economy.
Meanwhile, the European Central Bank rejected the accuracy of a Financial Times report on the euro-area’s interest-rate outlook. Bund futures had dropped on the article, which said the ECB could hit its 2% inflation target by 2025 based on unpublished internal models that raised the prospect of earlier than-expected rate hikes.
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Some of the main moves in markets:
- S&P 500 futures fell 0.1% as of 8:14 a.m. in Tokyo. The S&P 500 fell 0.2%
- Nasdaq 100 futures retreated 0.1%. The Nasdaq 100 rose 0.1%
- Nikkei 225 futures rose 0.2%
- S&P/ASX 200 futures fell 0.2%
- Hang Seng futures rose 0.3%
- The Bloomberg Dollar Spot Index was flat
- The euro was at $1.1765
- The offshore yuan was at 6.4534 per dollar
- The Japanese yen was at 109.73 per dollar
- The yield on 10-year Treasuries advanced four basis points to 1.34%
- Australia’s 10-year yield increased four basis points to 1.30%
- West Texas Intermediate crude was at US$72.63 a barrel
- Gold was at US$1,753.97 an ounce