(Bloomberg) — US stock futures rose in early Monday trade after a deal was reached over the weekend to avoid a government shutdown. A gauge of Asian equities opened lower amid concern global interest rates will stay elevated.
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Futures contracts on the S&P 500 climbed 0.4% after the passage of compromise legislation to keep the US government running until Nov. 17. Australia’s benchmark stock index fell 0.4%, while futures contracts for Japan slipped 0.2%. Moves may be exacerbated by thin liquidity as China markets are shut for a week-long holiday, while South Korea and a number of Australian states are also closed.
While markets may take some early relief from the US deal, attention will quickly shift to manufacturing activity and jobs data this week after the head of the Federal Reserve Bank of New York said Friday policy makers should leave interest rates high for some time.
“Financial markets were bracing for a shutdown, so there’s an element of relief, but it’s only a temporary lifting of one of the clouds hanging over the markets now,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “Interest rates and Fed hawkishness remain the name of the game and the main driver of the markets over the next few weeks.”
Read more: Traders Win Reprieve After ‘Political Circus’ of Shutdown Fight
A mixed opening on the first trading day of October may put a temporary stay on a torrid period for global financial markets. Elevated interest rates made the July-to-September quarter the worst for MSCI’s all-country stock index since September 2022 as surging oil prices added fears over inflation and slowing economic growth. Bonds meanwhile had their biggest monthly selloff in September since February
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While global rates may be close to their peaks, central banks are being hard-pressed to walk a fine line between reining in rising prices and skirting a recession. Fed chief Jerome Powell and his European Central Bank counterpart Christine Lagarde are both due to speak in the coming week and investors will scrutinize any reaction from them following data that suggested inflation has markedly slowed.
“Unless we get a clearly changed message from the key central banks – urgently — these past few weeks’ big market moves are unlikely to be over,” said Erik Nielsen, chief economics advisor at UniCredit Group. “The combination of high yields and zero growth typically raises concerns about financial stability, and while the key financial institutions are stronger today than in the past, it would be foolish to dismiss the rising risk.”
Read more: Once Unthinkable Bond Yields Now the New Normal For Markets
Key events this week:
China has week-long holiday
Japan Sept. quarter Tankan, Monday
Bank of England policy maker Catherine Mann speaks on monetary policy, Monday
Fed Chair Jerome Powell and Philadelphia Fed President Patrick Harker participate in a roundtable discussion, Monday
New York Fed President John Williams moderates discussion on climate risk, Monday
Cleveland Fed President Loretta Mester speaks on economic outlook, Monday
US ISM manufacturing index, Monday
Australia rate decision, Tuesday
Atlanta Fed President Raphael Bostic speaks on economic outlook and inflation, Tuesday
August US JOLTS report, Tuesday
Eurozone services and composite PMIs, Wednesday
ECB President Christine Lagarde gives welcome address at conference, Wednesday
US ISM services index, Wednesday
France industrial production, Thursday
BOE Deputy Governor Ben Broadbent, Riksbank First Deputy Governor Anna Breman participate at panel discussion, Thursday
San Francisco Fed President Mary Daly speaks at the Economic Club of New York, Thursday
Germany factory orders, Friday
September US nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.1% to $1.0561
The Japanese yen fell 0.2% to 149.60 per dollar
The offshore yuan fell 0.1% to 7.2988 per dollar
The Australian dollar was little changed at $0.6434
Cryptocurrencies
Bitcoin rose 3.1% to $27,942.75
Ether rose 3.3% to $1,730.2
Bonds
The yield on 10-year Treasuries was little changed at 4.57% on Friday
Japan’s 10-year yield advanced one basis point to 0.765% on Friday
Australia’s 10-year yield advanced three basis points to 4.49% on Friday
Commodities
This story was produced with the assistance of Bloomberg Automation.
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