Stocks, futures mixed as bond yields march higher: markets wrap

Gold was at $1 820.33 an ounce, climbing 0.1%.
Image: Qilai Shen/Bloomberg

Stocks were mixed Monday as traders weighed a global advance in sovereign bond yields and policy easing by China’s central bank to counter an economic slowdown.

Shares in China and Japan gained but Hong Kong declined. S&P 500 and Nasdaq 100 futures fell, while European contracts climbed. A dollar gauge ticked higher. US stock and bond markets are shut Monday for a holiday.

The People’s Bank of China exceeded market expectations for stimulus by cutting two key policy interest rates ahead of a report showing economic growth slowed last quarter to 4%. A real-estate slump and partial Covid shutdowns are among the challenges for the world’s second-largest economy.

Bond yields in Australia and New Zealand rose after US Treasuries tumbled Friday. The 10-year US yield — a linchpin for valuing a range of assets — is back up at levels seen before the pandemic roiled global markets in 2020, spurring a rethink about the outlook for markets. Treasury futures slid.

China’s prospects, tighter Federal Reserve monetary policy to fight high inflation and the omicron virus strain are coloring sentiment. Billionaire investor Bill Ackman said the Fed should raise its key interest rate by a bigger-than-expected 50 basis points in March to “restore its credibility.”

The start of the earnings season has also put the focus on corporate profits and whether they can help arrest a retreat in global equities led in part by a slide in US technology shares.

“Given the record inflation backdrop and historically tight labor market, investor focus is on margins — demonstrating pricing power, passing on rising costs to the customer,” Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, wrote in a note.

China contrast

Monday’s move by China’s central bank contrasts with the shift toward tighter monetary policy in the US and elsewhere to contain price pressures.

“The PBOC really has started the New Year in a different position to, let’s say, other global banks and we do expect to see further easing or supportive measures, both monetary-wise as well as from a fiscal stance,” Catherine Yeung, investment director at Fidelity International, said on Bloomberg Television.

Meanwhile, oil extended its rally. High prices are justified and futures could rise even further, according to Vitol Group, the world’s biggest independent crude trader. Among cryptocurrencies, Bitcoin slipped below $43 000.

In company developments, Credit Suisse Group AG’s Chairman Antonio Horta-Osorio resigned after just nine months in the role, following a series of missteps including reported breaches of Swiss and U.K. quarantine rules that eroded confidence in his leadership.

What to watch this week:

  • Goldman Sachs, Morgan Stanley, Bank of America, UnitedHealth Group and Netflix are among companies publishing earnings during the week
  • US data includes Empire manufacturing Tuesday, housing starts Wednesday and jobless claims Thursday
  • Bank of Japan monetary policy decision, Tuesday
  • Interest-rate decisions due from nations including Indonesia, Malaysia, Norway, Turkey and Ukraine, Thursday
  • EIA crude oil inventory report, Thursday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.3% as of 2:37 p.m. in Tokyo. The S&P 500 rose 0.1% Friday
  • Nasdaq 100 futures lost 0.5%. The Nasdaq 100 rose 0.8%
  • Japan’s Topix index added 0.4%
  • Australia’s S&P/ASX 200 index gained 0.3%
  • South Korea’s Kospi index fell 1.5%
  • China’s Shanghai Composite index rose 0.6%
  • Hong Kong’s Hang Seng index fell 1%
  • Euro Stoxx 50 futures increased 0.3%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.1%
  • The euro was at $1.1420, up 0.1%
  • The Japanese yen was at 114.44 per dollar, down 0.2%
  • The offshore yuan was at 6.3504 per dollar, up 0.1%

Bonds

  • The yield on 10-year Treasuries advanced eight basis points to 1.78% Friday
  • Australia’s 10-year bond yield rose seven basis points to 1.92%

Commodities

  • West Texas Intermediate crude rose 0.4% to $84.13 a barrel
  • Gold was at $1 820.33 an ounce, climbing 0.1%
© 2022 Bloomberg

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