U.S. stock futures fell in Asia on Monday after Beijing denied it was considering easing its zero COVID-19 policy, helping the dollar recoup some losses as it suffered a setback for oil and commodities.
Risk assets rallied on Friday amid speculation that China was preparing to relax its pandemic restrictions, but over the weekend health officials reiterated their commitment to a “dynamic cleaning” approach to COVID cases. as soon as they arise. “Despite denial, notions that China will go live with COVID in the new year are unlikely to be quashed given the very real toll COVID zero is taking on the economy,” said Tapas Strickland, chief economics officer. market at NAB.
“With China entering winter, most analysts believe a change to zero-COVID is unlikely until at least March.” Speculation that China might open its economy sent copper up 7% on Friday in its biggest one-day rally since 2009, while a variety of resources benefited on hopes of higher demand.
It also pushed the yuan higher and triggered a round of profit-taking on long US dollar positions, particularly against commodity-sensitive currencies such as the Australian dollar. A bit of that was reversed on Monday, with the Australian dollar down 0.4% at $0.6440.
The US dollar index rebounded 0.4% after falling almost 2% at the end of last week. The dollar was slightly higher than the yen at 146.77 yen, while the euro was down a fraction at $0.9944. S&P 500 futures pulled back and fell 0.5%, while Nasdaq futures lost 0.6%.
To illustrate the costs of Beijing’s strict policies, Apple Inc said on Sunday it expects lower-than-previously expected iPhone 14 Pro and iPhone Pro Max shipments as COVID-19 restrictions temporarily halt production. Still, investors seemed hopeful there might be something to the China easing story, with MSCI’s broader index of Asia-Pacific shares outside of Japan adding 0.3%.
Japan’s Nikkei rose 0.6% and South Korea’s 0.3%. Markets are now awaiting Chinese trade data due later in the session for guidance on global demand. LOOMS IPC USA
Reports that the White House is privately encouraging Ukraine to signal an opening to deal with Russia helped risk sentiment on the sidelines. Traders were still digesting a mixed US jobs report that showed solid gains in the payroll survey but weakness in the less reliable household unemployment survey.
Four Federal Reserve lawmakers indicated Friday they would still consider a smaller interest rate hike at their next policy meeting, sounding less aggressive than Chairman Jerome Powell. There are at least seven Fed officials scheduled to speak this week, which will help refine the outlook for rates as markets now lean narrowly toward a half-point rate hike next month to 4.25- 4.5%.
“We contend that the Fed will see enough progress in inflation to stop at 4.75% in February, but the risks are skewed to more hikes likely to trigger a recession sometime later in 2023 or early 2024,” said Bruce Kasman. , head of economic research. at JPMorgan. Short-dated Treasuries staged a minor rally on Friday with two-year yields retreating to 4.68% and from highs not seen since 2007.
The market faces a major headwind on Thursday when US consumer prices for October are released, and any surprise to the upside will test hopes of a taper in Fed hikes. Annual CPI inflation will slow to 8.0% and core inflation will ease a bit to 6.5%.
Also of note is Tuesday’s US midterm elections, in which Republicans could gain control of one or both chambers and lead to an impasse on fiscal policy. In commodity markets, gold fell to $1,673 an ounce after rising more than 3% on Friday.
Oil futures lost some of their gains with Brent down $1.66 at $96.91, while US crude fell $1.85 to $90.76 a barrel.
(This story has not been edited by Devdiscourse staff and is automatically generated from a syndicated feed.)