Asian index futures point to a lower start with US debt on the radar

BLOOMBERG — U.S. stock futures fell and the dollar traded in a tight range against major currency pairs as investors weighed signs of improvement in trade to avoid debt defaults and sustained inflationary pressures.

Most of the movement in early trading on Monday (15) was concentrated in emerging market currencies. Thailand’s baht rose as pro-democracy parties won a landslide victory in Thailand’s election, South Africa’s rand recovered after the country moved to ease tensions with the United States and investors awaited the lira’s renegotiation of Turkey’s presidential race.

The outlook for Asian stocks was mixed, with Hong Kong futures lower, Japan futures higher and Australian benchmark contracts slightly lower.

Investors lost hope that a break in the Federal Reserve’s interest rate hike cycle was a reality, following a slide in stocks and bonds on Wall Street on Friday. The S&P 500 was down 0.3% for the week, while the Nasdaq 100 was up 0.6%.

Inflation worries persist, with preliminary research from the University of Michigan showing that consumers expect prices to rise at an annual rate of 3.2% over the next 5 to 10 years, a 12-year high.

This is a very different situation in China, where inflationary pressures are easing, raising speculation that the central bank may ease monetary policy.

A Bloomberg Economics The medium-term borrowing rate will be cut by 10 basis points on Monday, while other analysts expect it to be 2.75%.

Meanwhile, progress in US debt ceiling negotiations has not eliminated the risk of a no-deal. Treasury Secretary Janet Yellen has warned that the Treasury Department could run out of money on June 1 or in the following weeks.

Aggressive remarks by central bank officials fueled unease among investors. Inflation is still high, Chicago Fed President Austin Goolsbee said in an interview with PBS. “You don’t want to drop the nose of the plane. So we try to balance ourselves – we can slow down inflation without pushing it into recession.

Goolsbee’s comments followed Federal Reserve Governor Michael Bowman saying the U.S. Federal Reserve may have to raise interest rates further if price pressures do not ease.

The yield on policy-sensitive two-year Treasuries rose to 3.99% on Friday, while the yield on 10-year Treasuries rose to 3.46%. New Zealand government bond yields rose slightly on Monday.

The dollar posted its biggest weekly gain since February as investors embraced its safe-haven status. Bitcoin fell below $27,000 and remained there on Monday.

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