US equity futures climbed and stocks in Asia dropped on Monday as investors assessed inflation risks amid improving economic activity. The dollar held onto gains.
Hong Kong led losses amid low volumes with Japan and China, as well as the UK, among markets closed for holidays. The US and European futures edged higher after the S&P 500 dropped from a record, amid data pointing to price pressures and talk of a possible pullback in central bank support. Still, the US gauge capped its biggest monthly rally since November.
Australia’s 10-year government bond yield inched up, after the Treasury benchmark held above 1.6%. The yen dropped. Crude oil headed lower, while gold ticked up.
Inflation remains a key concern for investors. The latest US data show fiscal stimulus helped drive the strongest monthly gains in personal incomes in records going back to 1946, and the Federal Reserve’s preferred gauge of prices rise by the most since 2018. Though last year’s pandemic shock has skewed some data, such readings fuel speculation that central banks may start to withdraw support by trimming asset purchases.
“Interest rates going forward will be led more by expectations on the tapering from the Fed rather than by inflation,” Raffaele Bertoni, head of debt capital markets at Gulf Investment Corp, said on Bloomberg Television.
In his latest annual meeting, billionaire Warren Buffett warned of rising price pressures and a “buying frenzy” spurred by low interest rates. Dallas Fed President Robert Kaplan, who’s not currently a voter on the rate-setting committee, said signs of excessive risk-taking suggest it’s time to consider fewer bond purchases. His remarks contrast with those of Fed Chairman Jerome Powell.
Top US financial officials are downplaying inflation risks. Treasury Secretary Janet Yellen said on the weekend that the demand boost from President Joe Biden’s economic plan would be spread over a decade.
In Asia, manufacturing activity remained robust through April, with gauges of activity in Taiwan and South Korea signaling ongoing expansion. Data showed that South Korean exports last month rise the most in 10 years, reflecting a recovery from the effects of the
Elsewhere, India’s coronavirus crisis is worsening, with daily deaths hitting another record. Prime Minister Narendra Modi has come under fire for his handling of the Covid-19 crisis and his party lost a key state election.
S&P 500 futures rise 0.2% as of 2 pm in Hong Kong and the S&P 500 falls 0.7%.
While Australia’s S&P/ASX 200 Index was little changed, South Korea’s Kospi index falls 0.8% and Hong Kong’s Hang Seng Index drops 1.5%. Euro Stoxx 50 futures rise 0.1%.
While the yen was at 109.63 per dollar, down 0.3, the offshore yuan was at 6.4798 per dollar and the Bloomberg Dollar Spot Index edged up 0.1% after climbing 0.7%. The euro traded at $1.2022
Treasury futures were flat after the 10-year yield held around 1.63% and Australia’s 10-year bond yield was little changed at 1.76%.
West Texas Intermediate crude falls 0.6% to $63.20 a barrel and gold was at $1,774.25 an ounce, up 0.3%.