US, Europe Futures Retreat; Dollars up with returns: Markets Wrap

(Bloomberg) — U.S. and European stock futures fell along with Asian stocks on Tuesday as investors weighed the prospect of central banks tightening policy more than previously expected to tame inflation.

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The dollar ticked higher, rising against its peers in the Group-of-10 currency basket, as sovereign yields rose in Asia after trading was closed for a US holiday on Monday.

Contracts for the S&P 500 and Nasdaq 100 futures lost more than 0.3%, indicating further downward pressure on US stocks after last week’s decline.

The MSCI Asia Pacific index fell 0.7%, with Hong Kong-listed technology shares leading decliners. HSBC Holdings Plc shares fell even after the company beat fourth-quarter profit forecasts.

Shares in mainland China swung after the CSI 300 benchmark posted its best one-day gain since November on Monday, as Goldman Sachs Group Inc. strategists said the country’s stocks could rise about a fifth from current levels this year.

The Japanese 10-year yield rose briefly above the central bank’s 0.5% yield curve control target for the first time since January. Investors are ready to hear from Kazuo Ueda, the nominee for the Bank of Japan governorship, who will face confirmation hearings in parliament on Friday.

The yield on the policy-sensitive two-year U.S. Treasury bond was near its highest since November as traders awaited the release of the PCE deflator, the Federal Reserve’s preferred measure of inflation, later this week.

“While some will focus on U.S.-China relations and point to upcoming meetings between the Chinese and Russians this week, the repricing and pressured higher interest rate expectations will ultimately open up the downside in equity markets,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note.

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Benchmark New Zealand government bond yields rose on Tuesday, while Australian yields ticked higher. Economists expect the Reserve Bank of New Zealand to raise interest rates by 50 basis points on Wednesday.

Meanwhile, the economic data that has come out so far “certainly puts a lot of cold water” on the argument that the Federal Reserve could stop or even cut interest rates soon, Chuck Cumello, president and CEO of Essex Financial Services, said on Bloomberg Radio. “We’re in for a more volatile ride and I think the market is finally waking up to the fact that prices are going to stay higher for longer,” he said.

Elsewhere, oil trading was choppy as investors weighed the possibility of further monetary tightening against signs of improved demand from China. Gold was little changed.

Important events this week:

• Earnings for the week are scheduled to include: Alibaba, Anglo American, AXA, BAE Systems, Baidu, BASF, Danone, Deutsche Telekom, Holcim, Home Depot, Hong Kong Exchanges & Clearing, Iberdrola, Lloyds Banking Group, Moderna, Munich Re, Newmont , Nvidia, Rio Tinto, Walmart, Warner Bros Discovery

• PMIs for Japan, Eurozone, UK, US, Tuesday

• Existing home sales in the US, Tuesday

• US MBA loan applications, Wednesday

• Federal Reserve minutes from Jan. 31-Feb. 1 policy meeting, Wednesday

• Eurozone CPI, Thursday

• US GDP, first jobless claims, Thursday

• Atlanta Fed President Raphael Bostic speaks Thursday

• G-20 finance ministers and central bank governors meet in India, Thursday-Friday

• Japan CPI, Friday

• BOJ governor nominee Kazuo Ueda appears before Japan’s lower house on Friday

Some of the main features of the markets from 06.47 London time:

Stock

• S&P 500 futures fell 0.4 percent

• Japan’s Topix fell 0.1 percent

• The Hang Seng in Hong Kong fell 1.3 percent

• The Shanghai Composite rose 0.4 percent

• Euro Stoxx 50 futures fell 0.2%

Currencies

• The Bloomberg Dollar Spot index rose 0.1 percent

• The euro fell 0.1% to $1.0671

• The Japanese yen fell 0.2% to 134.46 per dollar

• The offshore yuan fell 0.2% to 6.8760 per dollar

• The British pound fell 0.1% to $1.2027

Cryptocurrencies

• Bitcoin rose 0.8% to $24,975.46

• Ether rose 0.1% to $1,703.22

Bonds

• The yield on 10-year government bonds rose three basis points to 3.85%

• Japan’s 10-year yield was little changed at 0.50%

• Australia’s 10-year yield was little changed at 3.81%

Raw materials

• West Texas Intermediate crude was little changed

• Spot gold fell 0.1% to $1,838.69 an ounce

This story was produced with assistance from Bloomberg Automation.

–With assistance from Akshay Chinchalkar.

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