US equity futures extended losses Thursday and Asian stocks looked set to drop as a hawkish drumbeat from central banks reverberated across markets, supporting the dollar and pushing up bond yields.
(Bloomberg) — US equity futures extended losses Thursday and Asian stocks looked set to drop as a hawkish drumbeat from central banks reverberated across markets, supporting the dollar and pushing up bond yields.
Futures pointed to drops in Japan, Australia and Hong Kong when trading begins, while contracts on the S&P 500 and tech-heavy Nasdaq 100 retreated early in Asia, with the latter down about 1%.
The latest bout of risk aversion comes after US shares sealed their worst month since June and reflects fears of slowing economic growth alongside restrictive monetary policy to curb inflation.
Treasury futures slid along with bonds in Australia and New Zealand. The US 10-year yield pushed toward 3.20% on Wednesday, while short-dated real yields hit multiyear highs. The dollar was firm and the euro pared gains sparked by expectations of a bigger euro-area rate hike to cool record price pressures.
Oil was on the back foot, sliding to about $89 a barrel. Aggressive Federal Reserve tightening and China’s slowdown are dimming the demand outlook. Bitcoin weakened, taking out the closely watched $20,000 level.
Stock markets are entering a month that historically has been poor for returns after an August of losses across major asset classes. That poses more risks for an already fizzling bounce in global shares from June lows as the Fed pushes back against expectations of tempered rate hikes. Global bonds, meanwhile, are sliding toward the first bear market in a generation.
“It’s not that we necessarily need to get to lower lows” in stocks, Steven Wieting, chief investment strategist at Citigroup Private Bank, said on Bloomberg Television. But the “idea that we could already move forward and price in the recovery, that was the strained part” given that monetary policy is still tightening, he said.
No Cuts
Cleveland Fed President Loretta Mester reiterated the central bank needs to raise its benchmark rate above 4% by early next year. She said she doesn’t anticipate rate cuts in 2023.
Elsewhere, traders will be assessing the implications of a report that Tencent Holdings Ltd. has set a soft target of divesting about 100 billion yuan ($14.5 billion) of its $88 billion listed equity portfolio.
The WeChat operator last year began disclosing plans to sell shares in investees such as e-commerce giant JD.com Inc. and Southeast Asia’s Sea Ltd. That in turn spurred speculation it would soon consider paring stakes in other firms such as Meituan and Pinduoduo Inc.
Here are some key events to watch this week:
- ECB Governing Council members due to speak at event Tuesday through Sept. 2
- China Caixin manufacturing PMI, Thursday
- US nonfarm payrolls, Friday
- UK leadership ballot closes Friday. Winner announced Sept. 5
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Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.6% as of 8:38 a.m. in Tokyo. The S&P 500 fell 0.8%
- Nasdaq 100 futures fell 1%. The Nasdaq 100 fell 0.6%
- Nikkei 225 futures lost 1.2%
- Australia’s S&P/ASX 200 Index futures dropped 1%
- Hang Seng Index futures fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index was up 0.1%
- The euro was at $1.0041, down 0.1%
- The Japanese yen was at 139.28 per dollar, down 0.2%
- The offshore yuan was at 6.9120 per dollar, down 0.1%
Bonds
- The yield on 10-year Treasuries advanced nine basis points to 3.19% Wednesday
- Australia’s 10-year yield increased eight basis points to 3.68%
Commodities
- West Texas Intermediate crude fell 0.4% to $89.23 a barrel
- Gold was at $1,709.42 an ounce, down 0.1%
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