US futures fall, dollar rises as clock ticks Powell: Markets fold

(Bloomberg) — U.S. stock futures slipped on Friday and the dollar climbed as a chorus of Federal Reserve hawks set the stage for a much-anticipated speech by Chairman Jerome Powell that is set to shape views on the pace of monetary tightening.

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The S&P 500 and Nasdaq 100 futures were in the red after Wall Street’s rally on Thursday. Treasuries slipped, pushing the 10-year U.S. yield to 3.07%. In addition to Powell’s speech later on Friday, traders should watch a range of US data, including personal spending and the Fed’s preferred measure of inflation, which are expected to show easing price pressures.

Inventories in Europe were higher, led by miners, as prices of iron ore, copper and other industrial metals rose after China’s latest attempt to boost its flagging economy. Brent crude climbed to $100 a barrel. Gold and Bitcoin wobbled.

Powell may reiterate the Fed’s determination to keep raising interest rates to fight high inflation when he speaks at 10 a.m. Washington time on Friday in Jackson Hole, Wyoming. Fed officials gathering for the conference are already singing a hawkish scenario, pushing back expectations of limited tightening.

The recovery in stocks and bonds from June lows has left financial conditions at easier levels than before the start of the Fed’s aggressive tightening campaign. The question is whether Powell will try to reset market expectations to ensure the brakes remain on economic activity and whether that would undermine the second-half stock rally.

“While some data in recent weeks gave the impression that the US economy could escape a soft landing, while inflation is gradually converging towards the Fed’s target, fundamentals continue to point to weakness,” said Wolf von Rotberg, equity strategist at Bank J. Safra Sarasin Ltd.

US central bankers in Jackson Hole stressed the need to continue raising interest rates. Kansas City Fed President Esther George said a peak of more than 4% cannot be ruled out. The bond market remains divided on whether the Fed will hike by 50 basis points or 75 basis points in September.

The latest US growth data pointed in different directions in the first half of 2022, adding to the ongoing debate about the health of the economy. Europe’s outlook is darkening due to the continued rise in energy prices.

MSCI Inc.’s Asia-Pacific stock index. rose to a one-week high. Apparent progress in preventing a delisting of Chinese stocks in the US over a control dispute helped sentiment.

What to watch this week:

  • Fed Chairman Powell speaks in Jackson Hole on Friday

  • US Personal Income, PCE Deflator, University of Michigan Consumer Sentiment, Friday

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Some of the main movements in the markets:

inventories

  • The Stoxx Europe 600 was up 0.5 percent at 8:17 a.m. London time

  • S&P 500 futures fell 0.2%

  • Nasdaq 100 futures fell 0.3%

  • Futures on the Dow Jones Industrial Average fell 0.1%

  • MSCI Asia Pacific rose 0.3%

  • MSCI Emerging Markets rose 0.3%

currency

  • The Bloomberg Dollar Spot index rose 0.2%

  • The euro fell 0.2% to $0.9956

  • The Japanese yen fell 0.4% to 137.05 per dollar

  • The offshore yuan was down 0.3% at 6.8704 per dollar

  • The British pound fell 0.3% to $1.1791

Bindings

  • The 10-year bond yield rose four basis points to 3.07%

  • Germany’s 10-year yield rose two basis points to 1.34%

  • Britain’s 10-year yield was little changed at 2.62%

Goods

  • Brent crude rose 1.3% to $100.68 a barrel

  • Spot gold fell 0.3% to $1,754.30 an ounce

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