Dollar Steady, Stocks Head for Cautious Start: Markets Wrap

The dollar was steady and stocks were poised for a cautious start to the month as investors digested data showing Chinese manufacturing that missed forecasts.

The Australian dollar slipped after Perth in Western Australia state went into a five-day lockdown due to a coronavirus case. The New Zealand dollar was also lower in early Monday trading. Equity futures signaled a mixed start after the S&P 500 Index lost almost 2% on Friday. The yield on 10-year Treasuries ended last week around 1.07%.

A sharper slowdown in Chinese manufacturing provided a reminder to investors that the global economic recovery from the pandemic remains fragile. Global stocks retreated from all-time highs last month and losses grew last week as retail trading created havoc in some U.S. shares and traders mulled an uncertain outlook for deploying coronavirus vaccines.

Many equity markets “had a huge rally from early November supported by positive news regarding vaccines, more fiscal stimulus and monetary easing,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd. “This left them stretched and vulnerable to a correction which we may now be starting to see unfold as investors wait for hard evidence that the vaccines are working and that more U.S. stimulus will actually be passed by Congress.”

Meantime, in China, the central bankindicated it won’t drive up borrowing costs further after concern grew about a cash squeeze. Separately, the country’s purchasing managers’ indexes over the weekend showed Asia’s largest economy extended its expansion in January but lost speedmore abruptly than expected.

These are some key events coming up:

  • Earnings season is full steam ahead as companies report results, including Alibaba, GlaxoSmithKline, Ferrari, Exxon Mobil, BNP Paribas and Yum! Brands.
  • The Reserve Bank of Australia’s policy decision comes Tuesday.
  • Wednesday sees the EIA crude oil inventory report.
  • The Bank of England sets rates on Thursday and an Indian central bank policy decision comes then too.
  • The U.S. January payrolls report is due Friday, providing a first look at hiring in 2021.

Here are the main moves in markets:

Stocks

  • The S&P 500 fell 1.9% on Friday.
  • Futures on Japan’s Nikkei 225 rose 0.2% on Friday.
  • Hang Seng Index futures dropped 0.4% on Friday.
  • Futures on Australia’s S&P/ASX 200 Index slid 0.5% on Friday.

Currencies

  • The yen dipped 0.1% to 104.76 per dollar.
  • The offshore yuan was at 6.4502 per dollar.
  • The euro bought $1.2132.
  • The Aussie slipped 0.3% to 76.25 U.S. cents.
  • The kiwi declined 0.4% to 71.62 U.S. cents.

Bonds

  • The yield on 10-year Treasuries rose to 1.07% on Friday.

Commodities

  • West Texas Intermediate crude ended last week at $52.20 a barrel.
  • Gold was at $1,847.65 an ounce on Friday.

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