Stocks Mixed, Dollar Steady Amid Cautious Mood: Markets Wrap

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(Bloomberg) — Stocks were mixed Monday and the dollar was steady amid investor caution driven by worries over high inflation, tightening monetary policy and China’s Covid lockdowns.

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Europe’s Stoxx 600 fell after a downbeat Asian session affected by holiday closures, while U.S. equity futures made modest gains. April’s slump in U.S. shares — among the worst since the pandemic roiled markets in 2020 — is shadowing sentiment.

The stock slide, rising bond yields and dollar strength are tightening financial conditions ahead of looming U.S., U.K. and Australian interest-rate hikes.

Treasuries were little changed after tumbling on Friday and a dollar gauge held around the highest level since 2020.

The offshore yuan weakened in the wake of data signaling a sharp contraction in Chinese economic activity amid idled factories and snarled supply chains. Japan’s yen was also on the back foot against the greenback.

The Federal Reserve is expected to raise rates by 50 basis points on Wednesday, the largest increase since 2000. The question is how high it needs to go to get runaway inflation under control — and whether the aggressive tightening cycle that lies ahead will trigger a recession.

Bond yields may stay “elevated for the foreseeable future” due to inflation and the Fed’s sharp rate hikes allied with balance-sheet reduction, Seema Shah, chief global strategist at Principal Global Investors, wrote in a note.

Price pressures are being stoked by the elevated cost of commodities ranging from fuel to food, in part due to disruptions from Russia’s war in Ukraine.

Russia Tension

Those challenges could intensify: the European Union is set to propose a ban on Russian oil by the end of the year, with restrictions on imports introduced gradually until then, according to people familiar with the matter.

Crude fell as traders weighed the escalating tension between Europe and Russia against demand risks from China’s slowdown.

Chinese officials last week promised to scale up economic stimulus, which provided some respite for sentiment before a slide on Wall Street on Friday.

Key events this week:

  • Earnings include Airbnb, Airbus, BMW, BNP Paribas, BP, Credit Agricole, Hilton, ING Groep, Pfizer, Shell, Starbucks, Uber, VW

  • Reserve Bank of Australia rate decision, Tuesday

  • Fed rate decision, briefing with Chair Jerome Powell, Wednesday

  • EIA crude oil inventory report, Wednesday

  • Bank of England rate decision and briefing, Thursday

  • OPEC+ convenes virtually for a regular meeting, Thursday

  • U.S. April jobs report, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 fell 0.7% as of 8:04 a.m. London time

  • Futures on the S&P 500 rose 0.7%

  • Futures on the Nasdaq 100 rose 0.9%

  • Futures on the Dow Jones Industrial Average rose 0.6%

  • The MSCI Asia Pacific Index rose 1.9%

  • The MSCI Emerging Markets Index rose 2.1%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0555

  • The Japanese yen fell 0.4% to 130.26 per dollar

  • The offshore yuan fell 0.5% to 6.6726 per dollar

  • The British pound was little changed at $1.2563

Bonds

Commodities

  • Brent crude fell 0.5% to $106.56 a barrel

  • Spot gold fell 0.6% to $1,886 an ounce

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