A row of pumpjacks is seen as U.S. Vice President Mike Pence, not pictured, tours a Diamondback Energy Inc. oil rig in Midland, Texas, U.S., on Wednesday, April 17, 2019. Pence gave remarks to employees regarding the impacts of the Administration's United States-Mexico-Canada Agreement. , Bloomberg
(Bloomberg) -- US equity futures slipped, the yen weakened and the Norwegian krone climbed as the surprise production cut from OPEC+ sent oil prices about 7% higher.
The group’s decision to reduce output by more than 1 million barrels a day is a jolt to markets that had been looking to a near-term peak in inflationary pressure.
Contracts for the S&P 500 fell slightly early Monday and those for the Nasdaq 100 declined 0.3% as positive sentiment from Friday ebbed. The S&P 500 had jumped 3.5% last week, the most since November, while the tech-heavy Nasdaq 100 notched its biggest quarterly gain since June 2020.
“For equity investors, this could be a rude awakening, as markets imply a Goldilocks outlook of reduced discount rates but no recession,” said Ronald Temple, chief market strategist at Lazard Ltd. in New York. “The OPEC+ production cut is another reminder that the inflation genie is not back in the bottle.”
The Japanese currency depreciated about 0.3% versus the dollar in a reflection of the nation’s heavy reliance on oil imports, while the Norwegian krone led gains among Group-of-10 currencies, with the Scandinavian country an initial beneficiary of higher energy prices. Treasury futures were down.
The bumpy open to Monday trading and fears of rising prices contrasts with the upbeat tone last week that came with turmoil in the banking sector receding and cooling in a key measure of US inflation.
Excluding food and energy, the Federal Reserve’s preferred inflation gauge — the personal consumption expenditures price index — rose 0.3% in February, slightly below the median estimate. That suggested the Fed may be close to ending its rate-hiking campaign. The PCE price index was up 5% from a year earlier, a deceleration from January but far higher than the Fed’s 2% goal.
The OPEC+ cut combines with increased energy demand from China to raise the danger of more persistent inflation, said Lazard’s Temple. “It also likely limits the latitude central banks might have to relax monetary policy even if the economy slows,” he added.
Stock futures for Australia, Japan and Hong Kong had all pointed to gains when those markets opened — before the move by OPEC+. The group had previously given assurances that it would hold supply steady.
Traders will also be bracing for the opening of Treasuries later this morning. They ended the quarter of wild swings on Friday with the two-year yield falling to around 4.03% while the 10-year maturity dipped to 3.47%.
Bitcoin steadied after a slight decline early Monday. The cryptocurrency notched its best quarter since March 2021 with a gain of about 70% in the first three months of this year.
Key events this week:
China Caixin manufacturing PMI, Monday
Eurozone S&P Global Eurozone Manufacturing PMI, Monday
US construction spending, ISM manufacturing, light vehicle sales, Monday
Eurozone PPI, Tuesday
US factory orders, US durable goods, Tuesday
Australia rate decision, Tuesday
Cleveland Fed President Loretta Mester speaks, Tuesday
Eurozone S&P Global Eurozone Services PMI, Wednesday
US trade, Wednesday
UBS annual general meeting, Wednesday
US initial jobless claims, Thursday
St. Louis Fed President James Bullard speaks, Thursday
US unemployment, nonfarm payrolls, Friday
Good Friday. Many markets closed, including US stock and bond markets
Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 8:18 a.m. Tokyo time. The S&P 500 rose 1.4% Friday
Nasdaq 100 futures fell 0.3%. The Nasdaq 100 rose 1.7% Friday
Nikkei 225 futures rose 0.7%
Australia’s S&P/ASX 200 futures rose 0.8%
Hang Seng Index futures fell 0.6%
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro fell 0.2% to $1.0817
The Japanese yen fell 0.2% to 133.17 per dollar
The offshore yuan fell 0.1% to 6.8775 per dollar
The Australian dollar fell 0.2% to $0.6674
Cryptocurrencies
Bitcoin was little changed at $28,063.41
Ether rose 0.1% to $1,791.68
Bonds
The yield on 10-year Treasuries declined eight basis points to 3.47%
Australia’s 10-year yield declined one basis point to 3.29%
Commodities
West Texas Intermediate crude rose 6.7% to $80.76 a barrel
Spot gold fell 0.4% to $1,960.61 an ounce
(Source: Bloomberg), all rights reserved by original source.
