(Bloomberg) -- Investors are girding for another volatile week in markets, with Asian stocks poised to open lower, major currencies vulnerable to dollar strength and bond yields elevated amid persistent inflationary pressure.
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Equity index futures for Japan, Hong Kong and Australia all fell more than 1%. In foreign exchange markets, traders are on guard for possible intervention to support the yen, which touched a 32-year low Friday and is within reach of the key 150 level versus the greenback. The pound rallied in early Asia trading on expectations that the UK may reverse more of its unfunded tax cuts.
The S&P 500 fell more than 2% Friday while the growth-sensitive Nasdaq 100 dropped more than 3% and Treasury yields climbed as US year-ahead inflation expectations rose. The uptick in the outlook for consumer prices fueled bets that the Federal Reserve may make jumbo rate hikes at its next two meetings, further challenging global growth.
Against this negative backdrop, investors also have to contend with news out China’s Communist Party congress in Beijing, where President Xi Jinping said China’s global power had increased while warning of “dangerous storms” ahead. There were few signs of any let up in the Covid-Zero policy that’s weighing on the economy and Xi said China would prevail in its fight to develop strategically important technology amid rising tension with the US.
Corporate America offered some bright spots Friday, with big banks including JPMorgan Chase & Co. and Wells Fargo & Co. rising after reporting results, while Morgan Stanley fell as equity trading revenue disappointed.
Earnings this week will provide clues on the strength of a swathe of companies, including Bank of America Corp., Goldman Sachs Group Inc., Johnson & Johnson, Netflix Inc., Tesla Inc. and United Airlines Holdings Inc.
Fed officials in their latest comments suggested they were ready to hike rates higher than previously planned. Kansas City Fed President Esther George said the terminal rate may need to be higher to cool prices. San Francisco Fed’s Mary Daly said she’s “very supportive” raising to restrictive levels and to between 4.5% and 5% “is the most likely outcome.”
UK markets may be in for a particularly torrid week, with Britain’s beleaguered prime minister Liz Truss battling to rescue her premiership after the Bank of England ended its emergency bond-buying program on Friday.
Some of the main moves in markets as of 6:25 a.m. Tokyo time:
Stocks
The S&P 500 fell 2.4% on Friday
The Nasdaq 100 fell 3.1%
Hang Seng futures fell 1.2%
S&P/ASX 200 futures fell 1.5%
Nikkei 225 futures fell 1.9%
Currencies
The Bloomberg Dollar Spot Index rose 0.7% Friday
The euro was little changed at $0.9720
The Japanese yen was little changed at 148.62 per dollar
The offshore yuan was little changed at 7.2192 per dollar
The British pound rose 0.5% to $1.1222
Cryptocurrencies
Bitcoin was little changed at $19,331
Ether rose 0.1% to $1,312.44
Bonds
The yield on 10-year Treasuries advanced seven basis points to 4.02% Friday
Commodities
West Texas Intermediate crude fell 3.9% to $85.61 a barrel Friday
Spot gold fell 1.3% to $1,644.47 an ounce
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