(Bloomberg) — Nasdaq 100 Index contracts led U.S. futures lower, signaling a rout in technology stocks may continue. Treasuries were steady as investors weighed the Federal Reserve’s tightening path against the spread of the pandemic.
Nasdaq March futures fell 0.4% amid caution over the impact of higher yields on equity valuations. S&P 500 Index futures slipped 0.1%, 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 Tuesday showed mixed signs on U.S. inflation. Prices paid by manufacturers in December came in sharply lower than expected. However, figures showing a faster U.S. job quit rate added to concerns over wage inflation.
With 4.5 million Americans leaving their jobs in November, compared with 10.6 million available positions, the odds increased the Fed will struggle to influence the employment numbers increasingly dictated by social reasons. The data came before Friday’s monthly report from the Labor Department, currently forecast to show 420,000 job additions in December.
Treasuries were steady Wednesday, after yields rose this week amid increasing conviction the Fed will raise rates at least three times beginning in May to counter price pressures.
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.
Crude oil futures were steady. OPEC and its allies agreed to revive more halted production as the outlook for global oil markets improved, with demand largely withstanding the new coronavirus variant.
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 fell 0.1% as of 7:57 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 0.1%
- The euro rose 0.2% to $1.1306
- The British pound was little changed at $1.3537
- The Japanese yen rose 0.3% to 115.80 per dollar
Bonds
- The yield on 10-year Treasuries was little changed at 1.65%
- Germany’s 10-year yield advanced four basis points to -0.09%
- Britain’s 10-year yield was little changed at 1.08%
Commodities
- West Texas Intermediate crude rose 0.3% to $77.24 a barrel
- Gold futures rose 0.2% to $1,818.10 an ounce
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