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Asia Set to Join Risk Rally as Dollar Weakens: Markets Wrap


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(Bloomberg) — Asian equities are poised to follow Wall Street’s Friday rally while major currencies regain some of the ground they lost to a surging dollar that’s rattled global markets.

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US futures rose early Monday while contracts for Japan, Australia and Taiwan all pointed higher. Markets in China, Hong Kong and South Korea are closed for holidays.  

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The S&P 500 topped its 100-day average on Friday to snap a three-week losing streak and the Nasdaq 100 jumped more than 2%. Profitless tech firms, meme shares and Bitcoin all rallied. 

The euro led gains versus the greenback in Asia after Bundesbank President Joachim Nagel signaled support for further interest-rate hikes in Europe. The yen was steady against the dollar, with investors on guard after officials in Tokyo increased their jawboning of the currency over the weekend. 

The rebound in risk assets and the retreat in the dollar at the end of last week came despite hawkish remarks from Federal Reserve officials. That stance, and recession worries, has driven equities down to nearly oversold levels. The Levkovich Index, a sentiment gauge, fell to -16 last week, a hair away from the -17 level that defines panic. Bank of America Corp.’s bull-and-bear indicator slid to the “maximum bearish” level — often seen as a contrarian buy signal.

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Traders almost fully expect another jumbo-sized Fed hike next week, following two 75-basis-point increases. Fed Bank of St. Louis President James Bullard said he was leaning “more strongly” toward a third straight boost of that magnitude. His Kansas City counterpart Esther George noted officials have a “clear-cut” case for continuing to remove monetary support. 

Read: Forced Buying Puts a Floor Under Stocks Nobody Else Wants to Own 

Investors will also be digesting the potential impact of Ukraine’s counter-offensive, after its forces continued their rapid advance in the Kharkiv region, exploiting an extraordinary collapse of Russian defenses.  

Looking ahead, markets will be focused on the August consumer-price index due Tuesday, which is seen as one of the key reports before the next Fed rate decision. While an expected 8% rise in the CPI on the year would suggest inflation is cooling, the core measure that excludes food and energy is seen accelerating.

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Read: Yellen Says No Strong Labor Market in Long Run If Inflation High

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.3% as of 7:40 a.m. in Tokyo. The S&P 500 1.5%
  • Nasdaq 100 futures gained 0.4%. The Nasdaq 100 2.2%
  • Nikkei 225 futures climbed 0.7%
  • Australia’s S&P/ASX 200 Index futures jumped 1.1%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.1%
  • The euro rose 0.3% to $1.0067
  • The Japanese yen was little changed
  • The yield on 10-year Treasuries was little changed at 3.31% on Friday

Commodities

  • West Texas Intermediate crude slipped 0.4% to $86.49 a barrel
  • Gold futures were at $1,718.92



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