Bloomberg — Stocks in Asia got a lift Monday from a post-election rally in Japan but the wider market mood remained cautious amid the possibility of more Covid curbs in China that could weigh on the global economic outlook.
Japan shares added over 1.5%, buoyed by the prospect of administrative stability after the ruling coalition expanded its majority in an upper house election. US and European equity futures slipped following a weekly gain for global equities. A dollar gauge climbed while crude oil fluctuated.
In China, Shanghai reported its first case of the highly infectious BA.5 omicron sub-variant Sunday and warned of “very high” risks, stoking fears of more lockdowns given the nation remains wedded to stamping out the virus. Beijing has also pledged efforts to shore up the economy.
Hong Kong casino shares face a tough open after Macau announced the closure of almost all business for a week from Monday due to a virus outbreak.
Threats from high inflation and slowing economic expansion continue to shadow markets. A solid US employment report Friday eased some recession fears and stiffened expectations of more Federal Reserve monetary tightening.
Treasuries edged lower, taking the US 10-year yield toward 3.1%. Inversions along the yield curve are potential signs of economic retrenchment ahead.
An inflation reading due from the US later this week is expected to get closer to 9%, a fresh four-decade high, buttressing the Fed’s case for a jumbo July rate hike. Company earnings reports, meanwhile, will shed light on recession fears that contributed to an $18 trillion first-half wipeout in global equities.
The consumer-price index data will be “the core driver of risk this week” and a 9% print is possible, which “should keep US bond yields headed higher,” Chris Weston, head of research at Pepperstone Group, wrote in a note.
Elsewhere, the pound fell as the race to replace Boris Johnson as UK premier heats up.
Over in Europe, the main conduit for Russian gas to Europe goes down for 10-day maintenance on Monday. Germany and its allies are bracing for President Vladimir Putin to use the opportunity to cut off flows for good in retaliation for the West’s support of Ukraine following Russia’s invasion.
President Joe Biden said talks on possible action on US tariffs on Chinese imports are ongoing. His administration has been considering easing some Trump-era levies on consumer goods. Biden and his Chinese counterpart Xi Jinping are expected to speak again in the coming weeks.
What to watch this week:
- Earnings due this week from JPMorgan, Morgan Stanley, Citigroup, Wells Fargo
- New York Fed President John Williams participates in a discussion on Libor. Monday
- BOE Governor Andrew Bailey appears before the UK’s Treasury Committee. Monday
- Bank of Japan Governor Haruhiko Kuroda speaks. Monday
- BOE Governor Andrew Bailey discusses the economic landscape at event in London. Tuesday
- South Korea, New Zealand rate decisions. Wednesday
- Federal Reserve releases Beige Book. Wednesday
- US PPI. Thursday
- China property prices, retail sales, industrial production, GDP, surveyed jobless. Friday
- Group of 20 finance ministers and central bankers meet in Bali. Friday through July 16.
- Atlanta Fed President Raphael Bostic discusses monetary policy and global uncertainty at an event. Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.2% as of 9:36 a.m. in Tokyo. The S&P 500 fell 0.1% Friday
- Nasdaq 100 futures retreated 0.4%. The Nasdaq 100 rose 0.1% Friday
- Japan’s Topix index rose 1.7%
- Australia’s S&P/ASX 200 fell 0.1%
- South Korea’s Kospi index climbed 0.2%
- Hang Seng futures were little changed earlier
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was at $1.0158, down 0.3%
- The Japanese yen was at 136.32 per dollar, down 0.2%
- The offshore yuan was at 6.6935 per dollar, down 0.1%
Bonds
- The yield on 10-year Treasuries advanced one basis point to 3.09%
- Australia’s 10-year bond yield rose seven basis points to 3.55%
Commodities
- West Texas Intermediate crude rose 0.1% to $104.85 a barrel
- Gold was at $1,740.74 an ounce