Recession Anxiety to Weigh on Stocks as Bonds Rise: Markets Wrap

Futures were lower for Japan, Australia and Hong Kong, while US contracts fluctuated in early Asian trading

Inside the Hong Kong Stock Exchange.
By Andreea Papuc
July 24, 2022 | 06:13 PM

Bloomberg — Stocks look set to be tested Monday by concerns about a global slowdown as cooling expectations for peak interest rates bolster bonds.

Futures were lower for Japan, Australia and Hong Kong, while US contracts fluctuated in early Asian trading after mixed earnings and retreating gauges of business activity left US shares in the red on Friday.

New Zealand debt jumped in the slipstream of a Treasuries rally. Investors have shifted to betting that ebbing economic growth will help to moderate high inflation and soften the cycle of monetary tightening currently underway.

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Some of that view is evident in a recent drop in the dollar, which was mixed against major peers. Oil, meanwhile, hovered around $95 a barrel and Bitcoin held a little below $23,000.

Traders' inflation expectations have come back downdfd

This week’s Federal Reserve policy decision, along with earnings from the likes of Google’s Alphabet Inc. and technology titan Apple Inc., will help to clarify the outlook for a one-month-old stock rebound from this year’s bruising slide.

“We still see further downside for risky assets as recession fears accumulate and central banks remain committed to fighting inflation at the expense of growth,” Eric Robertsen, chief strategist at Standard Chartered Bank Plc, wrote in a note.

Treasury Secretary Janet Yellen said she doesn’t see any sign that the US economy is in a broad recession. Former Treasury Secretary Lawrence Summers said a soft landing is highly unlikely.

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In China, traders are awaiting developments on a potential restructuring plan for China Evergrande Group. The world’s most indebted developer -- whose liquidity woes sparked a broader debt crisis in China’s property industry -- has previously said it was on track to deliver a preliminary plan by the end of July.

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.2% as of 7:22 a.m. in Tokyo. The S&P 500 fell 0.9%
  • Nasdaq 100 futures lost 0.1%. The Nasdaq 100 fell 1.8%
  • Nikkei 225 futures fell 0.5%
  • Australia’s S&P/ASX 200 Index futures fell 0.2%
  • Hang Seng Index futures fell 0.9% earlier

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro was at $1.0214
  • The Japanese yen was at 136.26 per dollar
  • The offshore yuan was at 6.7646 per dollar

Bonds

  • The yield on 10-year Treasuries declined 12 basis points to 2.75% Friday

Commodities

  • West Texas Intermediate crude was at $95.48 a barrel, up 0.8%
  • Gold was at $1,726.48 an ounce