(Bloomberg) — Nasdaq 100 Index contracts fell amid mixed trading in U.S. futures, signaling a rout in technology stocks may continue. Treasuries dropped after a private jobs report showed robust hiring in the world’s largest economy.
Nasdaq March futures slid 0.4% amid caution over the impact of higher yields on equity valuations. S&P 500 Index futures were little changed, while Europe’s Stoxx 600 gauge traded near a record high. The dollar weakened. Pfizer Inc. advanced in New York premarket trading after BofA Global Research recommended the stock.
Markets got another reminder of the continuing threat to global growth from the pandemic as Hong Kong reimposed social curbs and halted flights from eight countries. Meanwhile, a selloff in technology stocks extended to Asia, sending a gauge of Chinese names listed in Hong Kong to a six-year low. Traders are now caught in a quandary over deepening fears on global growth combined with a faster tightening by the Federal Reserve.
“Earlier we thought that rate hikes wouldn’t be on the table until mid-2022 but the Fed seems to have worked up a consensus to taper faster and hike sooner rather than later,” Steve Englander, head of global G-10 FX research at Standard Chartered, said in a note. “But we don’t think inflation dynamics will support continued hiking. We suspect the biggest driver of asset markets will be when inflation and Covid fears begin to ebb.”
Data from the ADP Research Institute showed Wednesday U.S. companies in December added the most jobs in seven months, indicating that more Americans are returning to the labor force. The report precedes Friday’s monthly jobs report from the Labor Department, which is currently forecast to show that the U.S. added 384,000 private payrolls in December.
However, other data have shown that more than 10 million jobs can’t find people to fill them as the process known as the Great Resignation deepens. That leaves Fed with little power to influence the employment numbers increasingly dictated by social reasons.
The Fed’s other mandate, price stability, is seen coming to the fore from a policy perspective. Treasury yields are firmer this week amid increasing conviction the Fed will raise rates at least three times beginning in May to counter price pressures.
“Building evidence that omicron has lower severity than previous variants is helping reduce investor concerns about the economic impact of the current wave, allowing them to shift focus to inflation and the Fed policy pivot,” wrote Dennis DeBusschere, founder of 22V Research.
Europe’s equity benchmark advanced for a third day as carmakers and travel companies posted some of the biggest gains. The region’s technology gauge slipped 0.2%.
In New York premarket trading, Pfizer rose 1.8% after BofA’s buy recommendation. U.S. regulators this week cleared the company’s Covid-19 booster shot for younger adolescents.
In Hong Kong, the Hang Seng China Enterpries Index tumbled 2% to the lowest level since February 2016. Tencent Holdings Ltd. came under pressure as it pared investment in the technology sector amid Beijing’s regulatory crackdown.
Meanwhile, North Korea appeared to have launched its first ballistic missile in about two months, just days after leader Kim Jong Un indicated that returning to stalled nuclear talks with the U.S. was a low priority for him in the coming year.
What to watch this week:
- FOMC meeting minutes scheduled for release Wednesday
- Fed’s Bullard discusses the U.S. economy and monetary policy in an event on Thursday
- Fed’s Daly discusses monetary policy on a panel Friday
- ECB’s Schnabel speaks on a panel Saturday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 were little changed as of 8:48 a.m. New York time
- Futures on the Nasdaq 100 fell 0.4%
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 was little changed
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.3% to $1.1324
- The British pound rose 0.2% to $1.3554
- The Japanese yen rose 0.4% to 115.75 per dollar
Bonds
- The yield on 10-year Treasuries was little changed at 1.65%
- Germany’s 10-year yield advanced three basis points to -0.09%
- Britain’s 10-year yield was little changed at 1.08%
Commodities
- West Texas Intermediate crude rose 0.9% to $77.72 a barrel
- Gold futures rose 0.7% to $1,826.80 an ounce
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