Sydney, Nov 7 (BNA): US stock and commodity futures fell in Asia on Monday after Beijing denied it was considering easing its COVID-19 policy, although resilience in Asian stocks eased selling .
Risky assets surged on Friday amid speculation that China is preparing to ease its epidemic restrictions, but over the weekend health officials reiterated their commitment to a “dynamic clearing” approach to COVID cases as soon as they emerged, according to Reuters.
“Despite the denial, notions that China will mutate to coexist with COVID in the new year are unlikely to be eradicated, given the very real cost to the economy of the absence of COVID,” said Tapas Strickland, head of market economics at NAB.
“With China entering winter, most analysts believe a change in the absence of COVID is unlikely until at least March.”
Speculation that China might open up its economy sent copper up 7% on Friday in its biggest one-day rise since 2009, while a host of resources benefited from hopes of increased demand.
It also drove the yuan higher and triggered a round of profit taking from long US dollar positions, especially against commodity-sensitive currencies such as the Australian dollar.
Little of that reversed on Monday, with the Australian dollar dropping 0.7% to $0.6421 after jumping 3% on Friday. The dollar rose 0.7% on the offshore yuan.
The US Dollar Index rebounded 0.3% after falling nearly 2% at the end of last week. The dollar gained 0.4% against the yen at 147.22 yen, while the euro slipped slightly to $0.9929.
S&P 500 futures were down 0.2%, while Nasdaq futures were down 0.3%. EUROSTOXX 50 futures lost 0.2% and FTSE futures lost 0.6% amid reports that the British government plans to raise taxes and cut spending.
Chinese blue chips rose 0.2%, a good performance given earlier data which showed that Chinese exports and imports contracted in October and missed expectations.
To illustrate the costs of Beijing’s tough policies, Apple Inc said Sunday it expects iPhone 14 Pro and iPhone Pro Max shipments to be lower than previously expected as COVID-19 restrictions temporarily disrupt production.
However, investors seem to be hoping that there is something to the story of easing in China, and MSCI’s broadest index of Asia Pacific shares outside Japan rose 1.0%.
Japan’s Nikkei rose 1.2% and South Korea 0.8%.
Risk-on sentiment has helped marginalize reports that the White House is particularly encouraging Ukraine to signal its openness to negotiation with Russia.
Traders were still assessing the mixed US jobs report which showed strong gains in the jobs survey but weak in the less reliable households survey of unemployment.
Four Federal Reserve policymakers indicated on Friday that they are still considering a smaller rate hike at their next policy meeting, appearing less hawkish than Chairman Jerome Powell.
At least seven Fed officials are scheduled to speak this week, which will help improve the rate outlook with markets now narrowly tilting toward a half-point rate hike next month to 4.25-4.5%.
“We maintain that the Fed will see enough progress on inflation to halt at 4.75% in February, but risks are skewed towards further increases likely to lead to a recession sometime later in the year,” said Bruce Kasman, head of economic research. 2023 or early 2024″. In JPMorgan.
Short-term Treasuries managed a slight rally on Friday, with two-year yields slipping to 4.68% and well off highs not seen since 2007.
The market faces a major hurdle on Thursday when US consumer prices for October are released, with any bullish surprise to test hopes of a rollback of the Fed’s increases.
The median forecast is for annual CPI inflation to slow to 8.0% and the core index to decline to 6.5%.
Also of note is Tuesday’s US midterm elections where Republicans could win control of one or both houses and lead to a deadlock in fiscal policy.
In the commodity markets, gold slipped back to $1,671 an ounce after jumping more than 3% on Friday.
Oil futures lost some of their recent gains with Brent crude dropping from $1.07 to $97.50, while US crude fell $1.26 to $91.35 a barrel.
HF