Equities Edge Up, Politics Rumbles Over Currencies: Markets Wrap

(Bloomberg) — US and European stock futures inched higher while Asian equities advanced as investors weighed signs of progress in talks to avert a US debt default and persistent inflationary pressure.

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Political developments led to a busy session for emerging markets during Asian trading. The Thai baht climbed as pro-democracy parties got the most votes in weekend elections, and the rand rallied after South Africa moved to ease tensions with the US.

The lira was slightly weaker, falling 0.2% to a two-month low. State banks earlier intervened to hold Turkey’s exchange rate at around 19.65 per dollar, according to people familiar with the matter. Investors remained on tenterhooks with the the prospect of a runoff vote to test President Recep Tayyip Erdogan’s two decades in power.

China kept its medium-term lending facility at 2.75%, as economists had forecast, while injecting more long-term liquidity into the financial system for the sixth month in a bid to bolster growth when multiple economic indicators revealed faltering recovery momentum.

Japanese shares gained, with the Topix index nearing the highest level since 1990. Benchmarks in China, South Korea and Australia swung more firmly to gains during the Asian afternoon.

A measure of dollar strength was little changed, even as the greenback rose against the yen and fell versus the Australian currency. Treasuries were fractionally lower.

US inflation concerns ratcheted higher Friday, with a preliminary University of Michigan sentiment survey showing five-year expectations for consumer-price gains jumped to a 12-year high.

“There’s quite a fair bit of ongoing risk in the market,” Audrey Goh, senior cross asset strategist at Standard Chartered Wealth Management Group, said in an interview on Bloomberg Television. “The debt-ceiling talks are still in the making, at the same time we’ve also got inflation still quite elevated. There could be further downside from here where equity markets are concerned.”

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Progress in US debt-ceiling talks hasn’t removed the risk of a failure to reach a compromise. Treasury Secretary Janet Yellen has said the department may run out of money as soon as June 1, or in the weeks after that. President Joe Biden and House Speaker Kevin McCarthy plan to meet Tuesday.

Hawkish Fed

Hawkish comments from Fed officials have added to unease among investors. Inflation is still too high, Chicago Fed President Austan Goolsbee said in a PBS interview. “You don’t want to land the plane nose down. So we’re trying to balance off — can we slow the inflation without sending it into a recession.”

Goolsbee’s comments followed those of Fed Governor Michelle Bowman who said the central bank will likely need to raise interest rates further if price pressures don’t cool.

Yields on policy-sensitive two-year Treasuries touched 4% after rising on Friday. Australian and New Zealand bonds declined, following Friday’s losses in US debt.

Bitcoin rose back above $27,000 after falling below that mark last week amid an aversion to risk taking.

Billionaire Gautam Adani’s empire continues to draw the market’s attention. Shares declined after boards of two firms approved proposals to raise as much as $2.6 billion amid concerns about potential equity dilution.

Elsewhere in markets, oil fell for a fourth day as the outlook for demand was damped by worries over the US economy and China’s slower-than-expected recovery. Gold was marginally higher and iron ore rose above $100 a ton as inventories kept declining.

Wheat advanced on supply concerns stemming from a prolonged drought on the US Plains and uncertainty over the future of Black Sea trade from Ukrainian ports.

Key events this week:

• Eurozone industrial production, Monday

• US cross-border investment, New York Fed Empire Manufacturing, Monday

• Atlanta Fed’s Raphael Bostic speaks at his bank’s annual financial markets conference, Monday

• China retail sales, industrial production, Tuesday

• US retail sales, industrial production, business inventories, Tuesday

• Fed speakers include Cleveland’s Loretta Mester, New York’s John Williams, Atlanta’s Raphael Bostic and Chicago’s Austan Goolsbee, Tuesday

• Japan GDP, Wednesday

• Eurozone CPI, Wednesday

• US housing starts, Wednesday

• BOE Governor Andrew Bailey speaks at the British Chamber of Commerce, Wednesday

• US initial jobless claims, Conference Board leading index, existing home sales, Thursday

• Japan CPI, Friday

• ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday

• New York Fed’s John Williams speaks at monetary policy research conference in Washington, and Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.1% as of 6:47 a.m. London time. The S&P 500 fell 0.2% Friday

• Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 0.4%

• Japan’s Topix rose 0.8%

• Australia’s S&P/ASX 200 rose 0.1%

• Hong Kong’s Hang Seng rose 1.2%

• The Shanghai Composite rose 0.3%

• Euro Stoxx 50 futures rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro rose 0.2% to $1.0867

• The Japanese yen fell 0.3% to 136.15 per dollar

• The offshore yuan was little changed at 6.9670 per dollar

• The Australian dollar rose 0.4% to $0.6675

• The British pound was little changed at $1.2468

Cryptocurrencies

• Bitcoin rose 1.4% to $27,330.83

• Ether rose 1.5% to $1,825.81

Bonds

• The yield on 10-year Treasuries advanced one basis point to 3.48%

• Japan’s 10-year yield advanced two basis points to 0.405%

• Australia’s 10-year yield advanced nine basis points to 3.41%

Commodities

• West Texas Intermediate crude fell 0.4% to $69.79 a barrel

• Spot gold rose 0.3% to $2,016.03 an ounce

This story was produced with the assistance of Bloomberg Automation

–With assistance from Peyton Forte and Richard Henderson.

(An earlier version of this story was corrected to amend pricing of Hong Kong futures)

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