(Bloomberg) — US stock futures slipped and the dollar rose on renewed concerns about higher-for-longer US interest rates, with all eyes on the Federal Reserve’s policy decision due later Wednesday.
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The risk-off mood prevailed in a holiday-thinned session in Asia, where many markets were shut. Japan’s Nikkei 225 index dipped after recording its worst month since December 2022, while Australian shares also declined. The S&P 500 fell the most since January after a jump in a key gauge of US labor costs reinforced bets that officials will keep rates at a two-decade high for some time.
“Public holidays in China and parts of Europe will thin markets slightly, and there’s likely to be a level of risk aversion in Asian trade today going into the FOMC decision,” said Kyle Rodda, a senior market analyst at Capital.com. “If the Fed asserts a high probability of no cuts this year, or even the open possibility of another hike, that could deepen the sell-off in stocks.”
A dollar gauge extended its best daily gain in more than two weeks while the yen was steady. Treasury two-year yields turned flat after reaching the highest level since November.
“Monday’s BoJ intervention was likely the first shot in what will be a titanic battle between the macro forces supporting USD/JPY’s unrelenting rise and the resolve of Japanese currency officials,” said Tony Sycamore, market analyst at IG Australia. “This will likely see USD/JPY locked in a battleground between 155 and 160 in the coming weeks.”
In the corporate world, Japan’s Lasertec Corp shares climbed as much as 14%, after the semiconductor equipment maker reported strong order growth and consensus-beating third-quarter earnings.
Elsewhere, gold steadied after extending its decline from a record high reached in mid-April. Oil continued to slip as the potential for a cease-fire in the Middle East eased tensions.
Federal Reserve officials are poised to keep interest rates steady for a sixth consecutive meeting and signal no plans for cuts in the near future after higher-than-expected inflation.
The last time Fed Chair Jerome Powell spoke, he pointed to the lack of further progress in bringing inflation down and to enduring strength in the labor market. The latest inflation signals — in tandem with expectations for a robust employment report on Friday — aren’t likely to lead him to change his tune.
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A plunge in consumer confidence further weighed heavily on US equities — which suffered their worst month since September. In late hours, Amazon.com Inc. reported strong sales for its cloud unit amid rising artificial-intelligence demand. Advanced Micro Devices Inc., the second-largest maker of computer processors, gave a lukewarm revenue forecast for the current period.
Key events this week:
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Holiday across much of Asia and Europe, Wednesday
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Treasury’s quarterly refunding announcement, Wednesday
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US ADP employment change, JOLTS job openings, ISM Manufacturing, Wednesday
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Federal Reserve rate decision, Wednesday
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Eurozone S&P Global Manufacturing PMI, Thursday
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US factory orders, initial jobless claims, trade, Thursday
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Apple earnings, Thursday
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Eurozone unemployment, Friday
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US unemployment, nonfarm payrolls, ISM Services, Friday
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Chicago Fed President Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures were little changed as of 6:50 am London time
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Hang Seng futures fell 1.1%
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Japan’s Topix fell 0.4%
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Australia’s S&P/ASX 200 fell 1.1%
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Nasdaq 100 futures fell 0.3%
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Australia’s S&P/ASX 200 fell 1.1%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro fell 0.1% to $1.0655
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The Japanese yen was little changed at 157.88 per dollar
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The offshore yuan was little changed at 7.2496 per dollar
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The Australian dollar was little changed at $0.6475
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The British pound fell 0.1% to $1.2479
Cryptocurrencies
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Bitcoin was little changed at $59,925.11
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Ether rose 0.8% to $2,986.6
Bonds
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The yield on 10-year Treasuries was little changed at 4.68%
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Japan’s 10-year yield advanced two basis points to 0.890%
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Australia’s 10-year yield advanced eight basis points to 4.50%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck and Aya Wagatsuma.
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