NEW YORK, Sept 21 — Concern over the global economy and the outlook for US interest rates continued to dog financial markets, with stock futures foreshadowing further declines amid gains for bonds and gold.

Standard & Poor’s 500 Index futures dropped in early today trading, following a 1.6 per cent slump in the gauge Friday as investors digested the Federal Reserve’s decision to stand pat on interest rates amid global market turmoil. Asian index futures also signalled losses. The euro held declines with Greece’s anti-austerity Syriza set to remain in power after elections. Australian bonds rose, while gold futures traded near a two-week high.

With traders selling off risk assets at the end of last week in favour of haven investments, and bets on a rate hike being pushed out to next year, Fed officials sought to re-balance market expectations at the weekend. Three US policy makers, including St Louis Fed chief James Bullard, argued that higher American borrowing costs are still warranted this year, with two meetings remaining in 2015. Trading this week could get off to a muted start in Asia with Japanese markets closed through Wednesday for holidays.

“Investors seemingly decided that the Fed’s baulk was a sign that things are worse in the world than they actually appear,” Raiko Shareef, a markets strategist in Wellington at Bank of New Zealand Ltd., said in an e-mail to clients. “The Fed’s decision to hold last week means we’re in for, at the very least, another six weeks of ‘will they, won’t they.’ Risk markets are unlikely to like the message that the Fed remains very ready to hike.”

Early movers

S&P 500 futures lost 0.1 per cent by 8.06am in Tokyo, while contracts on stock gauges in Australia, Hong Kong, South Korea and China slipped at least 0.6 per cent at the end of last week. The Bloomberg Dollar Spot Index maintained its rebound amid the Fed commentary, with the euro steady at US$1.1293 (RM4.73) per dollar following Friday’s 1.2 per cent slump. Yields on Australian and New Zealand 10-year debt dropped by at least one basis point, and gold futures were little changed after their first weekly gain in in a month.

Rate bets

While fed funds futures had been pricing in a less than 30 per cent chance the Fed would raise rates last week, economists were relatively split. Slow inflation and the gyrations in markets since China unexpectedly devalued the yuan on August 11 were cited as reasons for delaying liftoff. Despite the comments in favour of a 2015 hike from Bullard, the Richmond Fed’s Jeffrey Lacker and San Francisco Fed chief John Williams, odds of an increase in October or December remain below 50 per cent.

The uncertainty over the global outlook and the Fed’s next move has stoked equity volatility, with the Chicago Board Options Exchange SPX Volatility Index climbing 5.4 per cent on Friday. Major US stock gauges slipped more than 1 per cent, with crude oil back below US$45 a barrel also driving losses among energy producers.

West Texas Intermediate crude added 0.3 per cent early today, to US$44.83 a barrel, after sinking 4.7 per cent on Friday amid ongoing concern over the global glut. Brent crude added 0.2 per cent to US$47.56 following a 3.3 per cent drop at the end of last week.

Elsewhere in commodities, gold futures were little changed at US$1,136.80 an ounce following a weekly advance of 3.1 per cent, the first since the second-last week of August. Copper futures on the Comex dropped 0.5 per cent to US$2.3730 a pound, extending Friday’s 2.7 per cent retreat.

Futures on Australia’s S&P/ASX 200 Index lost 1.5 per cent in most recent trading, while those on the Kospi index in Seoul retreated 0.9 per cent. Contracts on Hong Kong’s Hang Seng Index declined 1.4 per cent as futures on the Hang Seng China Enterprises Index, a gauge of mainland stocks listed in the city, sank 1.7 per cent. Futures on the FTSE China A50 Index and the CSI 300 Index were down at least 0.6 per cent.

New Zealand reports on credit-card spending today, while Hong Kong and Macau update consumer prices. — Bloomberg