(Bloomberg) — U.S. stock futures fell on Friday and the dollar rose as a chorus of Federal Reserve hawks set the stage for a much-anticipated speech by Chairman Jerome Powell that should shape views on the pace of monetary tightening.
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S&P 500 and Nasdaq 100 contracts were in the red after Thursday’s rally on Wall Street. Treasuries retreated, with the yield on the 10-year U.S. note hitting 3.07%. In addition to Powell’s speech later on Friday, traders should watch a range of US data, including personal spending and the Fed’s preferred measure of inflation, both of which are expected to show a cooling of price pressures.
European stocks erased gains to send the benchmark Stoxx Europe 600 to a second weekly decline, with media and travel the biggest losers. Miners rallied as prices for iron ore, copper and other industrial metals rose following China’s latest efforts to stimulate its stalled economy. European bonds edged lower.
Powell may reiterate the Fed’s determination to keep raising interest rates to fight high inflation when he speaks at 10 a.m. Washington time on Friday in Jackson Hole, Wyoming. Federal Reserve officials gathering for the conference are already singing a hawkish script, dismissing expectations of moderate tightening.
Stocks and bonds’ recovery from June bottoms has left financial conditions at easier levels than before the Fed began its aggressive tightening campaign. The question is whether Powell will try to reset market expectations to ensure the brakes continue to be applied on economic activity and whether that will undermine the stock rally in the second half.
Powell is likely to “underpin a re-tightening of financial market conditions and thus also the trend towards higher market interest rates recently, given that the Fed is still a step away from reining in inflation,” said Benjamin Schroder , Senior Rate Strategist at ING Groep NV. “Our economists see the risk that core inflation readings will continue to rise.”
US central bankers in Jackson Hole emphasized the need to continue raising interest rates. Kansas City Federal Reserve President Esther George said a peak above 4% cannot be ruled out. The bond market remains divided on whether the Fed will hike by 50 basis points or 75 basis points in September.
The latest US growth data points in different directions in the first half of 2022, adding to the ongoing debate about the health of the economy. The outlook for Europe worsens due to the continued surge in energy prices.
Brent crude reached $100 per barrel. Gold and Bitcoin faltered. The MSCI Inc. Asia-Pacific Stock Index. hit a one-week high. Apparent progress in preventing the delisting of Chinese stocks in the US over an audit dispute helped sentiment.
What to watch this week:
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Fed Chairman Powell speaks in Jackson Hole, Friday
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US Personal Income, PCE Deflator, University of Michigan Consumer Attitudes, Friday
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Some of the major moves in the markets:
Stock up
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The Stoxx Europe 600 was little changed at 9:21am London time
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S&P 500 futures fell 0.3%
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Nasdaq 100 futures fell 0.4%
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Dow Jones Industrial Average futures fell 0.2%
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MSCI Asia Pacific rose 0.3%
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MSCI Emerging Markets rose 0.3%
Currencies
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The Bloomberg Dollar Spot index rose 0.2%
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The euro was little changed at $0.9976
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The Japanese yen fell 0.4% to 136.98 per dollar
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The offshore yuan fell 0.3 percent to 6.8713 per dollar
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The British pound fell 0.4% to $1.1782
Bonds
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The 10-year Treasury yield rose four basis points to 3.07%
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Germany’s 10-year bond yield rose two basis points to 1.34%
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Britain’s 10-year bond yield was little changed at 2.62%
Goods
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Brent crude rose 1% to $100.37 a barrel
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Spot gold fell 0.4% to $1,752.08 an ounce
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