Stocks Face Rates Pressure After Jobs; Oil Gains: Markets Wrap

(Bloomberg) — Stocks are poised to start the week under pressure after a robust US jobs report left the door open for the Federal Reserve to maintain an assertive stance on inflation. Oil rose.

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Futures fell in Japan and Australia. US contracts fluctuated in early Asia trading after the S&P 500 retreated for an eighth week in nine.

Chinese and Hong Kong shares return after a long weekend as Beijing eases Covid-19 restrictions and the US commerce chief said lifting tariffs on some goods to tame inflation made sense. The Nasdaq Golden Dragon Index of Chinese shares traded in the US was up 2% over the last two trading session last week.

Crude oil rose past $120 a barrel. Saudi Arabia raised prices for its biggest market of Asia by more than expected, and the US was considering allowing more sanctioned Iranian oil onto global markets to counter the drop in Russian supplies. Crude has gained for six straight weeks as supply worries persist after a modest OPEC+ output increase.

The dollar traded within tight ranges versus major currencies at the start of the week in Asia Monday. The pound pared initial gains amid risks around a confidence vote on British Prime Minister Boris Johnson’s leadership.

Treasury yields climbed and the dollar strengthened Friday after May hiring data topped expectations. The next focus is May consumer prices this week to gauge whether US inflation has peaked.

Investors are fretting that a restrictive Fed could plunge the US economy into recession. The jobs report quelled some concern that the economy is slowing too sharply, but also strengthened the view that the Fed will keep hiking rates to douse inflation. Market-derived odds for a third 50 basis point increase in September held steady near 85%.

“The critical issue for markets is whether inflation can be brought under control by central banks without generating a recession,” Shane Oliver, head of investment strategy and chief economist at AMP Capital, said in a note. “Shares are likely to see continued short-term volatility as central banks continue to tighten to combat high inflation, the war in Ukraine continues and fears of recession remain.”

Key events to watch this week:

  • China Caixin services PMI Monday

  • Reserve Bank of Australia policy decision Tuesday

  • World Bank’s “Global Economic Prospects” report Tuesday

  • Reserve Bank of India rate decision Wednesday

  • OECD Economic Outlook, a twice-yearly analysis of major global economic trends and prospects for the next two years. Wednesday

  • European Central Bank rate decision, Christine Lagarde briefing, Thursday

  • China trade, new yuan loans, money supply, aggregate financing. Thursday

  • U.S. CPI, University of Michigan consumer sentiment Friday

  • China CPI, PPI Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures were little changed as of 7:20 a.m. in Tokyo. The S&P 500 fell 1.6%

  • Nasdaq 100 futures slipped 0.1%. The Nasdaq 100 fell 2.7%

  • Nikkei 225 futures fell 0.8%

  • Australia’s S&P/ASX 200 Index futures lost 0.4%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.4%

  • The euro was at $1.0722

  • The Japanese yen was at 130.92 per dollar

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 2.93%

Commodities

  • West Texas Intermediate crude rose 1.4% to $120.45 a barrel

  • Gold was at $1,850.55 an ounce

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