Turkey’s Lira Slides; Stocks Set for Mixed Start: Markets Wrap

(Bloomberg) — Asian stocks looked set for a mixed start as traders weighed inflation risks, a Covid-19 outbreak in China and earnings prospects for major technology firms. Turkey’s lira slid to a record low amid a diplomatic spat.

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Futures for Japan and Hong Kong fell Monday, while Australian stocks edged up. S&P 500 and Nasdaq 100 contracts dipped after U.S. equities and the 10-year Treasury yield declined on Friday. Federal Reserve Chair Jerome Powell flagged inflation could stay higher for longer, while making clear the Fed will begin tapering bond purchases shortly but stay patient on rate hikes.

The lira tumbled following President Recep Tayyip Erdogan’s weekend threats to expel ambassadors of 10 foreign countries, including those of the U.S. and Germany. The dollar was steady against major peers.

Traders are assessing a delta-variant virus outbreak in China that’s expected to worsen as well as economic challenges from the nation’s property-sector slowdown and regulatory curbs. In the U.S., the five largest technology companies are set to report earnings, heralding a test of investor sentiment.

Global equities have remained resilient in the face of risks from price pressures stoked by supply-chain bottlenecks and higher energy costs. Treasury Secretary Janet Yellen is among those counseling that the inflation situation reflects temporary pain that will ease in the second half of 2022. But investors are wary that tighter monetary policy to keep inflation in check will stir volatility in markets.

“While the risk of a correction for shares remains — with issues around inflation and China’s slowdown likely to linger for a while — they seem to be climbing the proverbial wall of worry,” Shane Oliver, head of investment strategy and chief economist at AMP Capital, wrote in a note.

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Elsewhere, the European Central Bank’s meeting this week will be closely watched for guidance on its pandemic bond-buying program.

Crude oil extended a rally. Saudi Arabia said oil producers shouldn’t take the rise in prices for granted because the coronavirus pandemic could still hit demand. Bitcoin was trading around $61,000.

Here are some events to watch this week:

• Earnings: Amazon, Apple, Facebook, Microsoft, Twitter, Samsung Electronics, HSBC Holdings, China Vanke, PetroChina, Ping An Insurance Group

• Australia CPI, Wednesday

• U.S. wholesale inventories, U.S. durable goods, Wednesday

• Bank of Japan monetary policy decision, briefing, Thursday

• ECB rates decision, President Christine Lagarde briefing, Thursday

• U.S. GDP, initial jobless claims, Thursday

• G-20 joint finance and health ministers meeting ahead of the weekend leaders’ summit, Friday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.2% as of 8:10 a.m. in Tokyo. The S&P 500 fell 0.1%

• Nasdaq 100 futures slipped 0.1%. The Nasdaq 100 fell 0.9%

• Nikkei 225 futures fell 0.7%

• Australia’s S&P/ASX 200 Index rose 0.4%

• Hang Seng Index futures fell 0.4% earlier

Currencies

• The Japanese yen traded at 113.54 per dollar

• The offshore yuan traded at 6.3829 per dollar

• The Bloomberg Dollar Spot Index was little changed

• The euro was at $1.1643

Bonds

Commodities

• West Texas Intermediate crude rose 0.4% to $84.09 a barrel

• Gold was at $1,793.38 an ounce

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