The search for safety kept the US dollar near 20-year highs, although early action was light as US markets went on vacation.
Cash treasury bills were closed but futures extended their gains, implying that 10-year yields are holding around 2.88% after falling 61 basis points from their June peak.
MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 0.3%, while Japan’s Nikkei added 0.9%.
However, S&P 500 and Nasdaq futures were down 0.4% after stabilizing a bit on Friday.
Goldman Sachs analyst David J. Kostin noted that all S&P 500 sectors except energy posted negative returns in the first half of the year amid extreme volatility.
“The current bear market has been driven entirely by valuations rather than lower earnings estimates,” he added.
“However, we expect the consensus profit margin forecast to decline, which will lead to downward EPS revisions whether or not the economy falls into recession.”
Earnings season begins July 15 and expectations are running low due to high costs and slowing data.
The Atlanta Federal Reserve’s closely watched forecast for current GDP slipped to a -2.1% annualized rate for the second quarter, implying that the country is already in a technical recession.
Friday’s jobs report is expected to show employment growth slowing to 270,000 in June, with the average wage slowing slightly to 5.0%.
Still, the minutes of the Fed’s June monetary policy meeting on Wednesday are almost certain to be hawkish, given that the committee opted to raise rates by 75 basis points.
The market sees a roughly 85% chance of another 75bp hike this month and rates reaching 3.25-3.5% by the end of the month. anna.
“But the market has also moved to price an increasingly aggressive rate-cutting profile for the Fed in 2023 and 2024, consistent with an increasing likelihood of recession,” the NAB analysts noted.
“About 60 basis points of Fed cuts are now expected for 2023.”
In currencies, investor demand for the most liquid safe haven has tended to benefit the US dollar which is near two-decade highs against a basket of competitors at 105.04.
The Euro held steady at $1.0433 and is not far off its recent five-year low of $1.0349. The European Central Bank is expected to raise interest rates this month for the first time in a decade, and the euro could get a boost if it decides to go half a point more aggressively.
The Japanese yen also attracted some safe-haven inflows late last week, bringing the dollar down to 135.00 yen from a 24-year high of 137.01.
A strong dollar and rising interest rates did not help non-performing gold, which was stuck at $1,808 an ounce after hitting a six-month low last week. [GOL/]
Fears of a slowing global economy also undermined industrial metals, with copper hitting a 17-month low after falling 25% from its March peak. [MET/L]
Oil generally performed better as supply constraints and the conflict in Ukraine offset concerns about demand. Production restrictions in Libya and a planned strike among Norwegian oil and gas workers are just the latest blows to production. [O/R]
Still, sellers were out early on Monday and Brent slid 34 cents to $111.29, while US crude lost 23 cents to $108.20 a barrel.