Asian stocks, US futures fall in cautious trading: markets unwind

(Bloomberg) – Stocks fell primarily in Asia as traders waited for a set of economic data that could help shed light on the way forward for interest rates.

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MSCI Inc.’s Asia Pacific Index was on course to close at its lowest level in more than two weeks, with all stock benchmarks in Hong Kong, South Korea and Australia falling. Contracts for the S&P 500 and Nasdaq 100 were down after a slow close last week.

Leveraged investors increased their net short positions in 10-year Treasury futures to a record 1.29 million contracts by April 18, data from the Commodity Futures Trading Commission shows. This is an indication that they believe the Federal Reserve will continue to raise interest rates to fight inflation.

“The notion that the Fed will cut aggressively by the end of the year is misleading,” Kim Strand, head of fundamental analysis and ESG integration at Franklin Templeton Investment Solutions, said in a speech on Bloomberg Television. “We believe what the Fed is saying: it’s going to go up and stay there until you see those inflation zones go down.”

In the swap markets, Fed rates will continue to peak in the coming weeks before a series of rate cuts later this year. US GDP data is forecast to show slowing growth, while the so-called core PCE deflator, the central bank’s preferred indicator of inflation, is likely to show a slowdown in price growth.

However, the central bank’s preferred wage measure is expected to reflect an acceleration in workers’ wages, according to forecasts by Bloomberg Economics.

Investors could take their time and see if the Fed will proceed with a widely-anticipated 25 basis point hike at the May 2-3 meeting, Ed Yardeni, founder of Yardeni Research Inc., wrote in a note.

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Sovereign bonds edged higher in Asia while Australian bonds fell. US two-year yields, which are more sensitive to the Fed policy outlook than longer maturities, were little changed on Monday after rising eight basis points last week.

The Bloomberg Dollar Spot Index rose while the yen lost gain. New Bank of Japan Governor Kazuo Ueda will hold his first policy meeting later this week. The central bank plans to review and inspect policies made over the past few decades as early as this week’s meeting, Sankei newspaper reported on Sunday.

A global measure of cross-asset volatility remained near its lowest level since February 2022, while other volatility measures, such as the VIX index and the ICE BofA MOVE index, are also well below recent highs.

The situation cannot last. Volatility is likely to increase due to uncertainty after the Fed’s May meeting, said Priya Misra, global head of rates strategy at TD Securities in New York. “There is enough uncertainty about the economic outlook and how the Fed might respond,” she said on Bloomberg radio.

Elsewhere this week, the euro zone is due to release GDP data and there will be a policy decision in Sweden.

A busy earnings week will include Credit Suisse Group AG and UBS Group AG, First Republic Bank and First Citizens Bank, the buyer of Silicon Valley Bank. Tech companies will also be in the spotlight, including Microsoft Corp., Meta Platforms Inc. and Amazon.com Inc.

In commodities, oil extended its decline after last week’s decline and gold slipped.

Important events this week:

• ECB Governing Council members Boris Vujcic and Francois Villeroy de Galhau speak at events on Monday

• New US Home Sales, Consumer Confidence, Tuesday

• South Korea’s GDP, Tuesday

• CPI Australia, Wednesday

• Sweden rate decision, Wednesday

• Eurozone Economy, Consumer Confidence, Thursday

• US Initial Jobless Claims, GDP, Thursday

• Bank of Japan meets Friday on interest rates

• Eurozone GDP, Friday

• US personal income, Friday

Result Highlights:

• Monday: Credit Suisse, Coca-Cola, First Republic

• Tuesday: Pepsi, General Motors, General Electric, McDonalds, Microsoft, UBS, UPS

• Wednesday: Boeing, Meta, Hilton

• Thursday: Amazon, American Airlines, Intel, Mastercard, Southwest Airlines, Hershey, Honeywell, Barclays

• Friday: First Citizens Bank, acquirer of Silicon Valley Bank

Some of the key movements in the markets:

Shares

• S&P 500 futures were down 0.3% as of 11:55 a.m. Tokyo time. The S&P 500 rose 0.1% on Friday

• Nasdaq 100 futures fell 0.3%. The Nasdaq 100 rose 0.1%

• Japan Topix Index up 0.4%

• Hong Kong’s Hang Seng index fell 0.7%

• China’s Shanghai Composite Index fell 0.5%

• Australia’s S&P/ASX 200 index fell 0.1%

currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro was little changed at $1.0983

• The Japanese yen fell 0.2% to 134.37 per dollar

• The offshore yuan fell 0.2% to 6.9107 per dollar

• The Australian dollar fell 0.2% to $0.6681

cryptocurrencies

• Bitcoin rose 0.7% to $27,687.33

• Ether was up 0.9% to $1,865.57

Bind

• The 10-year government bond yield fell one basis point to 3.56%

• Japan’s 10-year yield rose 0.5 basis points to 0.465%

• Australia’s 10-year yield was little changed at 3.46%

raw materials

• West Texas Intermediate Crude fell 1% to $77.07 a barrel

• Spot gold fell 0.1% to $1,980.45 an ounce

This story was created with the support of Bloomberg Automation.

–Assisted by Richard Henderson.

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