Asian equity futures declined as Wall Street’s risk-on mood faded a day after the rally in big tech.
Stock traders are awaiting Nvidia Corp.’s results later Wednesday, which are set to test the fervor around the artificial-intelligence hype, while wider markets are marking time ahead of a speech from Federal Reserve Chair Jerome Powell on Friday.
Contracts for Japanese shares dropped 0.6%, those for Hong Kong slipped 0.5% and futures for Australia’s benchmark eased 0.2%. Elevated bond yields continue to cause concern, even as moves moderated on Tuesday.
The 10-year Treasury rates were little changed after benchmark yields hit an almost 16-year high Monday as the resilient economy has investors positioning for the Federal Reserve to keep borrowing costs elevated.
The S&P 500 extended its August slide, with banks dropping as S&P Global Ratings joined Moody’s Investors Service in cutting some US lenders amid a “tough” climate. Macy’s Inc. sank 14% as credit-card delinquencies accelerated, raising a red flag about consumer health. Nvidia fell 2.8% on the eve of its quarterly report.
In a sign of how significant Nvidia’s results will be, the options market is bracing for a move of about 10% following the results. With Nvidia accounting for over 3% of the S&P 500, the stock action will possibly have broader implications. The shares briefly touched an all-time high on Tuesday.
Meanwhile, the surge in US yields has been the primary reason stocks have declined over the past several weeks, with investors “pushing out” the date of expected rate cuts as they begin to accept the Fed may keep rates “higher for longer,” according to Tom Essaye, founder of “The Sevens Report” newsletter.
“It’s not the height of rates that matters as much as how long they stay high,” Essaye noted. “If we see Powell hint at higher for longer on Friday, we will need to brace for more equity market volatility.”
Powell is set to speak Friday at the Kansas City Fed’s Jackson Hole Economic Policy Symposium. Investors will look to the highly anticipated speech for clues on the outlook for interest rates, which the Fed last month lifted to a range of 5.25% to 5.5%, the highest level in 22 years.
Elsewhere in markets, major currencies traded in narrow ranges early Wednesday. The yen was steady after the third gain in four days, while remaining at a relatively weak level.
Key events this week:
- Eurozone S&P Global Services & Manufacturing PMI, consumer confidence, Wednesday
- UK S&P Global / CIPS UK Manufacturing PMI, Wednesday
- US new home sales, S&P Global Manufacturing PMI, Wednesday
- US initial jobless claims, durable goods, Thursday
- Kansas City Fed’s annual economic policy symposium in Jackson Hole begins, Thursday
- Japan Tokyo CPI, Friday
- US University of Michigan consumer sentiment, Friday
- Fed Chair Jerome Powell, ECB President Christine Lagarde to address Jackson Hole conference, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 8:05 a.m. Tokyo time. The S&P 500 fell 0.3%
- Nasdaq 100 futures rose 0.1%. The Nasdaq 100 fell 0.2%
- Nikkei 225 futures fell 0.6%
- Australia’s S&P/ASX 200 Index futures fell 0.2%
- Hang Seng Index futures fell 0.5%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0847
- The Japanese yen was little changed at 145.81 per dollar
- The offshore yuan was little changed at 7.3053 per dollar
- The Australian dollar was little changed at $0.6425
Cryptocurrencies
- Bitcoin fell 0.3% to $25,783.36
- Ether fell 0.7% to $1,618.68
Bonds
- The yield on 10-year Treasuries declined one basis point to 4.32%
- Australia’s 10-year yield declined two basis points to 4.25%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Rita Nazareth.
