U.S. Futures Slide After Fed Stimulus Clash: Markets Wrap

U.S. futures slid in Asian trading Friday after a clash between Treasury Secretary Steven Mnuchin and the Federal Reserve on its emergency lending facilities. Asian stocks looked set for a muted open.

S&P 500 contracts retreated after the Trump administration and the Fed publicly disagreed over whether to extend the pandemic programs. Technology shares had led U.S. benchmarks higher as investors weighed the impact of tougher virus restrictions against the prospect of a vaccine rollout in the months ahead. Shares of companies poised to do well during lockdowns outperformed. Futures were little changed in Japan, Australia and Hong Kong.

Treasury yields retreated and the dollar dipped after U.S. weekly jobless claims came in higher than forecast. Gold extended a drop amid a drawdown in bullion-backed exchange-traded funds. Tesla Inc. rose to a record as investors bet that the global car market will be dominated by electric cars in decades ahead.

Mnuchin on Thursday sought the return of unused funds from the Fed’s emergency lending facilities but the central bank pushed back and said the programs served a vital role. Mnuchin sought a 90-day extension for four programs, but requested others expire on schedule on Dec. 31 and the Fed return $455 billion to the Treasury so Congress can spend the money elsewhere.

Some of the investor optimism over vaccine progress that lifted global stocks to an all-time high Monday has ebbed, amid a surge in virus cases and strain on public health facilities in many parts of the world. California imposed a curfew across the vast majority of the state, one of the world’s toughest lockdowns is underway in South Australia and Tokyo raised its virus alert to the highest level.

The International Monetary Fund and Group of 20 nations warned that fresh restrictions on households and companies due to the resurgence of Covid-19 are a risk to the global economic recovery. The IMF noted progress on a vaccine, but also said elevated asset prices point to a disconnect from the real economy and a potential threat to financial stability.

“There’s the push-pull of short-term versus long-term and that’s what investors are looking at right now,” said Chris Gaffney, president of world markets at TIAA Bank. “There are some very serious risks in the short term, especially with the lockdowns.”

Elsewhere, Turkey’s lira strengthened after the country’s new central bank governor raised the benchmark interest rate.

These are the main moves in markets:

Stocks

  • S&P 500 futures fell 0.8% at 8:08 a.m. in Tokyo. The S&P 500 Index rose 0.4%.
  • Nikkei 225 futures rose 0.1%
  • Australia’s S&P/ASX 200 Index futures rose 0.4%
  • Hang Seng Index futures earlier climbed 0.2%

Currencies

  • The Bloomberg Dollar Spot Index dipped 0.2% Thursday.
  • The euro was steady at $1.1870.
  • The pound fell 0.1% to $1.3252.
  • The yen was down 0.1% to 103.80 per dollar.

Bonds

  • The yield on 10-year Treasuries decreased four basis points to 0.83% Thursday.

Commodities

  • West Texas Intermediate crude fell 0.4% to $41.58 a barrel
  • Gold fell 0.2% to $1,863 an ounce.

— With assistance by Jan-Patrick Barnert, and Todd White

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