Stocks in Asia, U.S. Futures Slide; Euro Climbs: Markets Wrap

(Bloomberg) — Stocks in Asia and U.S. Futures fell Monday as investors weigh the potential for more aggressive interest-rate increases on the economy and earnings. The euro gained after Emmanuel Macron’s win in the French election removed a key risk for markets.

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Equities declined in Japan and South Korea, while futures slid earlier in Hong Kong. S&P 500 contracts dropped in a sign of further weakness after the benchmark capped the longest run of weekly losses since January. Nasdaq 100 futures also fell with the tech gauge poised for the worst month since 2008 as traders ratchet up expectations for steep policy tightening to tame inflation.

Macron defeated far-right leader Marine Le Pen in the French presidential election on a pro-business platform, bolstering the euro. A dollar gauge held on Friday’s gains. The yen was steady ahead of the Bank of Japan meeting this week, which is expected to underscore the monetary policy divergence with the U.S.

Yields retreated as Treasuries paused the rout of the past week that roiled markets trying to gauge how high yields can go. Risk assets remain under pressure with bond markets boosting their longer-term inflation expectations.

Federal Reserve Chair Jerome Powell endorsed a 50 basis-point increase next month and at least one more such move, outlining his most bold approach yet to reining in surging prices. Stronger tightening signals from the European Central Bank are also undermining risk appetite.

“There has been little to avert the investor pessimism as inflation and interest rate expectations start to bite,” Geir Lode, head of global equities at Federated Hermes Ltd., said in a note. “In particular due to the uncertainty of the macro environment, expectations are low with regard to forward estimates and guidance, building on lowered expectations from the previous quarter.”

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Investors will also be keeping a close watch on any policy measures from China as Chinese assets are under pressure, with the yuan dropping to a one-year low Friday. The nation’s Covid-zero policy…


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