(Bloomberg) -- Equity futures point to Asian stock markets opening little changed Tuesday as investors weigh weak factory data against inflation concerns fueled by OPEC+’s surprise plan to cut oil output.
Contracts for Japan fell marginally while those for Australia and Hong Kong suggested little change. Futures for US benchmarks dropped fractionally as they opened in Asia following a mixed session on Wall Street.
Much of the action in the US was in the debt market, with gains in Treasuries after a gauge of factory activity contracted by more than expected. That came after China’s manufacturing activity unexpectedly eased in March.
While such data is tempering inflation concerns despite expected energy hikes after the cartel’s production cut, it also shows the darkening economic outlook is spreading to Asia.
Federal Reserve Bank of St. Louis President James Bullard told Bloomberg Television Monday that OPEC+’s decision was unexpected and an increase in oil prices could make the Fed’s job of lowering inflation more challenging. “Whether it will have a lasting impact I think is an open question,” he said.
The Institute for Supply Management’s gauge of US manufacturing activity decreased to 46.3 in March, below the median estimate of 47.5 in a Bloomberg survey of economists. Readings below 50 indicate contraction. Measures of new orders and employment retreated.
As the possibility of a recession looks more certain, the upcoming earnings season may be the first of several difficult quarters, according to Chris Harvey, head of equity strategy at Wells Fargo & Co.
“We have been seeing for a number of quarters, margins starting to compress, and we think this is where it comes to roost,” Harvey said on Bloomberg Television. “This is the period where if you can’t make numbers, if margins get compressed, this is where you get penalized.”
JPMorgan Chase & Co. strategist Marko Kolanovic reiterated the bank’s underweight call on equities in a note to clients, warning that “stocks are set to weaken for the remainder of the year” as headwinds from banking turbulence, oil shocks, and slowing growth linger.
Energy shares led gains in S&P 500 Monday, with US crude rallying the most in more than a year hitting $80 a barrel. The Nasdaq 100 underperformed major benchmarks as Tesla Inc. sank on data showing its price cuts barely boosted deliveries. Policy-sensitive two-year yields reversed course after earlier climbing as much as 11 basis points.
Looking to the Asian trading session, investors will will have a focus on Australia. Economists are divided over whether the central bank there will raise interest rates for an 11th consecutive meeting or pause its most aggressive tightening cycle since 1989 amid cooling economic momentum.
Australian bond yields dropped, with both the three-year and 10-year maturities down about seven basis points, largely in line with moves in Treasuries.
The nation’s currency was little changed after a 1.5% gain Monday and a gauge of greenback strength was also flat after a 0.4% decline.
Further into the week, the US government’s monthly employment report will be released Friday and will give a fuller picture of the job market. Swaps linked to Fed interest-rate expectations showed a quarter-point hike in May as more likely than not.
Key events this week:
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. US stock markets closed, bond markets close for part of the day
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.1% as of 8:09 a.m. Tokyo time. The S&P 500 rose 0.4%
Nasdaq 100 futures fell 0.1%. The Nasdaq 100 fell 0.3%
Nikkei 225 futures fell 0.1%
Australia’s S&P/ASX 200 Index futures were little changed
Hang Seng Index futures were little changed
Currencies
The Bloomberg Dollar Spot Index was unchanged
The euro was little changed at $1.0907
The Japanese yen rose 0.2% to 132.26 per dollar
The offshore yuan was little changed at 6.8740 per dollar
The Australian dollar was little changed at $0.6788
Cryptocurrencies
Bitcoin rose 1.2% to $27,915.36
Ether rose 1.7% to $1,811.41
Bonds
The yield on 10-year Treasuries declined six basis points to 3.41%
Australia’s 10-year yield declined seven basis points to 3.25%
Commodities
West Texas Intermediate crude was little changed
Spot gold was little changed
(Source: Yahoo Finance), all rights reserved by original source.
