(Bloomberg) — Stocks looked set for a cautious start Monday after a Federal Reserve official flagged the possibility of sharper interest-rate increases and data from China signaled slower economic growth.

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U.S. futures dipped and Australian shares fell, while Japan and Hong Kong contracts pointed to muted opens. Hong Kong is among markets with a shorter session for the Lunar New Year holiday, while China and South Korea are shut. Weekend data showed moderating Chinese factory output and services.

The Fed’s hawkish pivot to fight inflation and an uneven corporate earnings season have contributed to intense volatility. U.S. stocks last week saw three of the biggest intraday reversals of the decade before ending little changed.

Fed Atlanta branch president Raphael Bostic told the Financial Times that a 50 basis-point rate increase or hikes at each policy meeting this year are options to fight inflation. But he said three quarter-point moves starting March are the most likely 2022 outcome. The dollar inched higher against some key peers.

Bond investors are also braced for more swings as the Fed and other central banks reduce pandemic-era stimulus. Shorter-maturity Treasuries sensitive to rate expectations slid last week and the yield curve flattened.

Profit reports from the likes of Alphabet Inc. and Meta Platforms Inc. as well as monetary policy decisions from the European Central Bank and Bank of England will help shape the market mood in the days ahead.

Some strategists argue global stocks are due for a steadier period, even if only temporarily, after shedding more than 6% in January. In the futures market, for instance, some speculative S&P 500 bets are the most bullish since 2018.

Story continues

The equity selloff “marks a long overdue correction rather than the start of a bear market,” BCA Research Inc. analysts including Peter Berezin and Melanie Kermadjian wrote in a note. “Stocks often suffer a period of indigestion when bond yields rise suddenly, but usually bounce back as long as yields do not move into economically restrictive territory,” they added.

Fizzling Bubbles

Goldman Sachs Group Inc.’s economists now predict the Fed will lift its near zero benchmark by 25 basis points five times this year rather than on four occasions. That would take it to 1.25%-1.5% by the end of the year.

Meanwhile, crude oil climbed and gold extended a retreat. In the cryptocurrency sector, Bitcoin was steady at around $38,000, nursing a drop of some 18% so far this year.

Various speculative bubbles are deflating without significantly affecting financial-market functioning or adversely impacting the economy, Ed Yardeni, president of Yardeni Research, wrote in a note. That reduces “the chances of a recession and a bear market in the S&P 500,” he said.

Elsewhere, tension between the U.S. and Russia continues over the Russian troop buildup near Ukraine’s border. U.S. lawmakers are close to finalizing the language for a sanctions bill.

For more market analysis, read our MLIV blog.

What to watch this week:

  • Earnings are due from Alphabet, Amazon, Exxon Mobil, Ford Motor, Meta Platforms, Qualcomm, Sony, Spotify, UBS Group

  • Euro zone GDP growth data, Monday

  • San Francisco Fed President Mary Daly due to speak at event, Monday

  • Reserve Bank of Australia rate decision, Tuesday

  • Manufacturing PMIs, including euro zone, Tuesday

  • OPEC+ meeting on output, Wednesday

  • Euro zone CPI, Wednesday

  • Bank of England, European Central Bank rate decisions, Thursday

  • Fed Board of Governors confirmation hearing, Thursday

  • U.S. factory orders, initial jobless claims, durable goods, Thursday

  • U.S. payrolls report for January, Friday

  • Winter Olympics kick off in China, Russia’s President Vladimir Putin due to attend opening ceremony, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.2% as of 8:28 a.m. in Tokyo. The S&P 500 rose 2.4%

  • Nasdaq 100 futures declined 0.3%. The Nasdaq 100 rose 3.2%

  • Nikkei 225 futures were little changed

  • Australia’s S&P/ASX 200 index fell 0.7%

  • Hang Seng futures rose 0.3% earlier

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was at $1.1146

  • The Japanese yen was at 115.33 per dollar

  • The offshore yuan was at 6.3661 per dollar

Bonds

  • The yield on 10-year Treasuries declined three basis points to 1.77%

  • Australia’s 10-year bond yield fell three basis points to 1.91%

Commodities

  • West Texas Intermediate crude rose 1.1% to $87.75 a barrel

  • Gold was at $1,789.96 an ounce, down 0.1%

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