US Futures Dip, Stocks Mixed on Fed, China Caution: Markets Wrap

(Bloomberg) — US equity futures fell and Asian stocks were mixed Monday, hampered by the challenges swirling around China and a reminder from Federal Reserve officials that their key objective is to fight high inflation.

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S&P 500 and Nasdaq 100 contracts were in the red, while Japan countered losses in Hong Kong to help MSCI Inc.’s Asia-Pacific share index edge up.

Recent developments underlined the economic challenges facing China, including shrinking property sales and a contraction in factory activity that highlighted the cost of Beijing’s preference for mobility curbs to tackle Covid.

Meanwhile, Fed Bank of Minneapolis President Neel Kashkari said Sunday the central bank is committed to reaching its long-term inflation goal of 2%. Before that, Fed Bank of Atlanta President Raphael Bostic said the monetary authority has further to go in raising borrowing costs.

Treasury yields inched higher but at about 2.67% the 10-year yield is well down from June’s peak near 3.50%. The yen jumped for a fourth session versus the greenback. Oil, gold and Bitcoin all retreated.

A slowing economy has cooled expectations for the scale of Fed interest-rate hikes needed to tame inflation, spurring a July rebound in both stocks and bonds. But officials may be wary of market jumps that ease financial conditions and thus imperil the goal of squeezing demand to fight price pressures.

“We are in a bear market rally,” Barbara Ann Bernard, founder of hedge fund manager Wincrest Capital Ltd., said on Bloomberg Radio, adding she foresees a deceleration in expectations for corporate earnings.

Investors are also monitoring US House Speaker Nancy Pelosi’s trip to Asia. A statement from her office skipped any mention of a possible stopover in Taiwan. A visit may stoke US-China tension over the island.

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Taiwan’s currency slid past 30 per dollar for the first time since 2020. Asia’s manufacturing slowdown is weighing on export-reliant economies like Taiwan.

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