(Bloomberg) — Treasuries advanced, while major Asian equity markets were mixed and European shares appeared set for a softer open in light of lackluster corporate earnings.
Most Read from Bloomberg
South Korean and Japanese shares fell, sending MSCI’s Asian index lower. European futures declined amid uncertainty about the path of interest rates on both sides of the Atlantic. Weak company earnings added to the headwinds for Europe’s markets, with Remy Cointreau SA cutting its sales guidance due to slack US sales on Friday.
Mainland China and Hong Kong shares rallied, while American equity futures were little changed.
Treasury yields fell for a second day as traders reassessed bets on US rate cuts and risks from the upcoming presidential election. The dollar was steady, on track for a fourth straight weekly gain.
A surge in Treasury yields earlier in the week had led to risk-off moves across markets, as traders scaled back expectations for Federal Reserve rate cuts. The views among European Central Bank ratesetters are also starting to diverge. Economic data next week including the monthly payrolls report will provide more clarity, while polls on the presidential election show a tie between Donald Trump and Kamala Harris in swing states.
“We have seen this upward move in terms of US Treasury yields actually supporting the dollar index,” said Carie Li, global market strategist, DBS Bank Hong Kong, speaking on Bloomberg Television. “After the election we are still expecting the dollar index to trend lower because we expect the Fed will further cut interest rates no matter who wins.”
The yen was stuck in a range against the dollar ahead of the weekend’s election that may see Japan’s ruling coalition lose its majority in the lower house of parliament for the first time since 2009. Such an outcome would weaken the yen and Japanese stocks, according to strategists.
Moreover, Governor Kazuo Ueda signaled the central bank won’t hike interest rates next week, with almost all BOJ watchers already expecting no policy shift this month. Ueda spoke after the yen slid to the lowest level since July 31 against the dollar earlier this week.
Elsewhere in Asia, China’s central bank kept its one-year policy rate unchanged, after slashing funding costs by the most on record a month ago, suggesting authorities are cautiously pacing monetary stimulus to support the economy.
Yet the country’s recent barrage of fiscal measures falls short of what’s needed to address deflationary risks, according to one senior International Monetary Fund official. The central government “has to spend” more to address the property crash and ease price pressures, Krishna Srinivasan, the organization’s Asia-Pacific department chief, said prior to the policy rate announcement.
Money markets are currently pricing a strong chance the Fed will cut rates by a quarter-point next month, and about 43 basis points of cuts by year-end, according to data compiled by Bloomberg.
“Investors see the resiliency of the economy and employment forcing the Fed to be ‘slower to lower’ on rates,” said Sam Stovall at CFRA, who anticipates two 25 basis-point cuts in 2024.
In commodities, oil advanced after dropping Thursday as oversupply concerns overshadowed the risks from Israel’s potential retaliatory strike on Iran. Gold fell Friday, though remained near its record high.
Key events this week:
Some of the main moves in markets:
Stocks
-
S&P 500 futures were little changed as of 6:54 a.m. London time
-
Nasdaq 100 futures were little changed
-
Futures on the Dow Jones Industrial Average were little changed
-
The MSCI Asia Pacific Index fell 0.1%
-
The MSCI Emerging Markets Index was little changed
-
Japan’s Topix fell 0.8%
-
Hong Kong’s Hang Seng rose 0.8%
-
The Shanghai Composite rose 0.6%
-
Euro Stoxx 50 futures fell 0.3%
Currencies
-
The Bloomberg Dollar Spot Index was little changed
-
The euro was little changed at $1.0822
-
The Japanese yen rose 0.1% to 151.66 per dollar
-
The offshore yuan fell 0.1% to 7.1332 per dollar
-
The British pound was little changed at $1.2968
Cryptocurrencies
-
Bitcoin fell 0.6% to $67,711.01
-
Ether fell 1.7% to $2,491.82
Bonds
-
The yield on 10-year Treasuries declined four basis points to 4.17%
-
Germany’s 10-year yield declined four basis points to 2.27%
-
Britain’s 10-year yield advanced four basis points to 4.24%
-
Japan’s 10-year yield was little changed at 0.945%
-
Australia’s 10-year yield declined four basis points to 4.41%
Commodities
-
Spot gold fell 0.3% to $2,728.20 an ounce
-
West Texas Intermediate crude rose 0.2% to $70.36 a barrel
This story was produced with the assistance of Bloomberg Automation.
—With assistance from David Finnerty.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.