Image: Reuters Berita 24 English - On Monday, Asian stocks were unable to maintain a rare advance as Wall Street futures lost early gains ...
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| Image: Reuters |
Berita 24 English - On Monday, Asian stocks were unable to maintain a rare advance as Wall Street futures lost early gains amid fears that the US Federal Reserve would reiterate its commitment to fighting inflation with whatever rate hikes are required this week.
The euro weakened marginally after French President Emmanuel Macron lost control of the National Assembly in Sunday's legislative elections, a huge blow that could plunge the country into political gridlock.
Due to a U.S. holiday, trade was thinned, and Nasdaq futures fell flat after briefly rising more than 1%, while S&P 500 futures fell 0.2 percent. Futures on the EUROSTOXX 50 plummeted 0.6 percent, while FTSE futures dipped 0.3 percent.
Last week, the S&P 500 lost about 6%, putting it 24 percent below its January peak. According to analysts at BofA, this is the 20th bear market in the past 140 years, with a 37.3 percent average loss from peak to trough.
Given that it would not terminate until October 2022, investors will be hoping it does not match the average duration of 289 days.
Outside of Japan, MSCI's broadest index of Asia-Pacific equities down 0.8 percent, while Tokyo's Nikkei fell 1.4 percent.
The news that President Joe Biden was considering eliminating certain tariffs on China helped Chinese blue chips to hold stable.
Concerns that major central banks may have to tighten so forcefully to limit runaway inflation that the world will enter recession loom over markets.
"Market volatility has remained elevated, with the VIX index closing at its highest weekly close since late April, a theme that extends beyond stocks with a surge in FX and rates volatility, as well as wider credit spreads," said NAB strategist Rodrigo Catril.
"Until we see indications of a meaningful relaxation in inflationary pressures, it's difficult to see a change in fortunes."
This week's inflation data in the United Kingdom are expected to show another frighteningly high reading, pushing the Bank of England to hike rates even quicker.
THE FEDERAL RESERVE BECOMES UNCONDITIONAL
This week, a chorus line of central bankers is scheduled to testify, highlighted by Federal Reserve Chair Jerome Powell's expected hardline testimony before the House on Wednesday and Thursday.
Last week, the Fed declared its commitment to keeping inflation under control to be "unconditional," and Fed Governor Christopher Waller stated on Saturday that he would back another 75-basis-point raise in July.
"With quickly decreasing growth momentum and a Fed devoted to price stability, we believe a mild recession beginning in Q4 is now more likely than not," Nomura analysts cautioned.
"Financial conditions are likely to tighten further, consumers are facing a large negative sentiment shock, energy and food supply disruptions have increased, and the prognosis for international growth has deteriorated," says the report.
The dollar is hovering at 104.660, close to its two-decade high of 105.790, thanks to the hawkish outlook.
Following the French election, the euro fell a little to $1.0490, remaining uncomfortably near to last week's low of $1.0357.
The yen remained under pressure as the Bank of Japan clung to its ultra-easy policies despite all of its developed-world rivals tightening. After reaching its highest level since 1998 last week, the dollar stayed stable at 135.00 yen.
Bitcoin fell 3% to $19,897 after a big rise over the weekend amid reports of a single large buyer.
Gold has been trapped in a tight sideways pattern for the past month or two due to the strength of the dollar, and it was last trading around $1,836 an ounce. [GOL/]
After a dramatic drop late last week, oil prices began to fall again, owing to concerns that high energy prices were adding to the dangers of a worldwide recession, which would stifle demand. [O/R]
Brent slipped 70 cents to $112.42 a barrel, while US crude fell 66 cents to $108.90.
