Futures, Bonds Drop On Fed Outlook; Dollar Rises: Markets Wrap

Wall Street equity futures, European stocks and bonds dropped as an unexpectedly strong US jobs report raised the prospect of more rate hikes from the Federal Reserve. Concern over US-China geopolitical tensions also weighed on sentiment.

Contracts on the S&P 500 and the Nasdaq 100 were down by at least 0.6%, but off their lows for the session. The Stoxx Europe 600 index slid after closing Friday in a bull market, with the rates-sensitive technology and real estate sectors leading the retreat.

The dollar strengthened for a third day after a gauge of its strength rose more than 1% Friday, when figures showed a surge in payrolls and unemployment at a 53-year low. This points to persistent US inflation and bolsters the case for more rate increases. Treasury yields added to their post-jobs data climb.

“The state of the employment sector is a significant factor in the Federal Reserve’s decision-making process, and thus the number has certainly provided investors with another factor to consider when predicting the course of the Fed’s movements over the next couple of months,” economists at Rand Merchant Bank in Johannesburg wrote in a note.

US-listed Chinese stocks were on track to fall for a third session, after Washington’s move to shoot down an alleged surveillance balloon from China spurred new tensions between the two countries. The US sent divers to salvage what they believe is spy equipment from the Chinese balloon off the coast of South Carolina, with pressure mounting on President Joe Biden to hit back at Beijing with new export control measures.

In Japan, the yen weakened after the Nikkei reported that the government had approached Bank of Japan Deputy Governor Masayoshi Amamiya about succeeding Haruhiko Kuroda as head of the central bank. While the Japanese government refuted the report, investors assume a greater likelihood of the current ultra-easy monetary policy enduring if one of its architects succeeds Kuroda.

On the outlook for US stocks, Goldman Sachs Group Inc. strategists said the rally over the past month may be as good as it gets this year. The S&P 500 now accurately reflects signs of better-than-expected economic growth and a drop in bond yields, strategists led by David J. Kostin wrote in a note.

Morgan Stanley’s Michael Wilson broadly shares that view, while JPMorgan Chase & Co. strategists said international markets continue to screen as “much more interesting” than the US.

In other New York premarket trading moves, Newmont Corp. fell after it offered to buy Australia’s Newcrest Mining Ltd. in a $17 billion deal that would strengthen the US company’s position in copper and gold. Spotify Technology SA gained after analyst ratings upgrades for the music streaming giant.

Elsewhere, oil prices increased after Turkey halted flows of oil carried by pipeline to the Ceyhan export terminal on the Mediterranean coast as a precaution following the devastating earthquakes in the region on Monday. Gold rose.

More than 1,000 people have been killed in Turkey and neighboring Syria after the countries were hit by some of the most powerful quakes to strike the Middle East in decades. Turkey’s lira held steady against the dollar, while the country’s benchmark stock index dropped, with the Istanbul exchange suspending short selling as part of measures to limit wider market fallout.

Adani Group assets are facing continued volatility. Billionaire Gautam Adani and his family have prepaid $1.11 billion worth of borrowings backed by shares as the conglomerate seeks to allay investor fears and stem a stock rout that’s in its third week, with six of the group’s 10 stocks ending lower in Mumbai on Monday.

Key events this week:

• Earnings this week are scheduled to include: AP Moller-Maersk, Apollo Global Management, AstraZeneca, BNP Paribas, BP, CME Group, Duke Energy, KKR, Nintendo, PepsiCo, Semiconductor Manufacturing International, Siemens, SoftBank Group, Toyota Motor, Uber Technologies, Unilever, Walt Disney
• Eurozone retail sales, Monday
• Australia rate decision, Tuesday
• US trade, Tuesday
• Fed Chair Jerome Powell at the Economic Club of Washington, Tuesday
• US President Joe Biden delivers the State of the Union address, Tuesday
• India rate decision, Wednesday
• US wholesale inventories, Wednesday
• New York Fed’s John Williams at event in New York
• Sweden rate decision, Thursday
• US initial jobless claims, Thursday
• ECB President Christine Lagarde participates in EU leaders summit, Thursday
• Bank of England Governor Andrew Bailey appears before Treasury Committee, Thursday
• China PPI, CPI, BoP, Friday
• US University of Michigan consumer sentiment, Friday
• Fed’s Christopher Waller and Patrick Harker speak, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.6% as of 8:27 a.m. New York time
• Nasdaq 100 futures fell 0.8%
• Futures on the Dow Jones Industrial Average fell 0.5%
• The Stoxx Europe 600 fell 0.7%
• The MSCI World index fell 0.6%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%
• The euro fell 0.2% to $1.0772
• The British pound was little changed at $1.2063
• The Japanese yen fell 0.9% to 132.33 per dollar

Cryptocurrencies

• Bitcoin fell 0.1% to $22,873.96
• Ether rose 0.7% to $1,633.45

Bonds

• The yield on 10-year Treasuries advanced nine basis points to 3.61%
• Germany’s 10-year yield advanced nine basis points to 2.28%
• Britain’s 10-year yield advanced 17 basis points to 3.23%

Commodities

• West Texas Intermediate crude rose 1.3% to $74.32 a barrel
• Gold futures rose 0.4% to $1,885 an ounce

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