Stock Rally’s Durability Is Key Issue for Traders: Markets Wrap

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(Bloomberg) — Stocks may extend a rally Monday but questions abound about how long the bear market can be kept at bay amid high inflation, monetary tightening and the risk of a recession.

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Futures rose for Japan, Australia and Hong Kong after a near-5% jump in global shares last week, the best such performance in a month, as investors snapped up beaten-down shares in defensive sectors like healthcare and technology.

Contracts for the S&P 500 and Nasdaq 100 fluctuated in early Asian trading, while the dollar was mixed against major peers.

Treasury yields have retreated as worries about economic growth take center stage, leaving the US 10-year yield at 3.13%. Whether that marks the end of the worst Treasury bear market of the modern era is another live debate.

Oil dropped to about $106 a barrel. The Group of Seven nations is evaluating a potential price cap on Russia crude over its invasion of Ukraine.

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Investors are parsing incoming data to work out whether the highest inflation in a generation is close to peaking, and whether that means central bankers can in time ease up on aggressive interest-rate hikes.

“Although inflation is probably close to its peak, it is likely to remain sticky at elevated levels for the balance of the year, contributing to an uncomfortable growth-inflation trade-off for central banks,” Silvia Dall’Angelo, senior economist at Federated Hermes Ltd., wrote in a note.

Federal Reserve Bank of San Francisco President Mary Daly said Friday she favors another 75 basis-point rate increase in July. Meanwhile, Fed Bank of St. Louis President James Bullard said fears of a US recession are overblown.

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Elsewhere, Russia is on the brink of a foreign bond default. A grace period on about $100 million of missed bond payments — blocked because of wide-ranging sanctions — ends on Sunday night. 

The US, UK, Japan and Canada also plan to announce a ban on new gold imports from Russia during a summit of Group of Seven leaders, who plan to commit to providing indefinite support to Ukraine for its defense against Russia’s invasion.

Some of the main moves in markets:

Stocks

Currencies

Bonds

Commodities

• West Texas Intermediate crude fell 1.3% to $106.27 a barrel
• Gold was at $1,834.03 an ounce, up 0.4%