Stock futures are trending lower; Japanese Bond Yields Rise: Markets Wrap

(Bloomberg) — European and U.S. stock futures fell slightly as investors prepared for a slew of economic data and remarks from Federal Reserve speakers in the coming days that will help determine the outlook for interest rates . The yield on two-year Japanese bonds rose to its highest level in more than a decade.

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Futures pointed to more stock losses after the S&P 500 slipped Monday for the first time in four days ahead of this week's data release, including the Fed's preferred inflation gauge due on Thursday. Asian stocks were mixed, although Chinese stocks mostly rose, led by technology companies.

Japan's two-year yield climbed to its highest level since 2011 after stronger-than-expected inflation data bolstered bets that the central bank will end its negative interest rate policy in the coming months. According to swaps data compiled by Bloomberg, traders increased the likelihood that the Bank of Japan will exit its negative interest rate policy by April to about 82% from 78% on Monday. The yen strengthened against the dollar.

The inflation report “fuels speculation that the BOJ will end negative interest rate policy as early as March and serves as a selling catalyst for bonds,” said Kazuya Fujiwara, fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. The data underscores ongoing inflationary pressures, he said.

Asia's equity benchmark is heading for a monthly rise, boosted by a rally in Japanese and Chinese markets. However, there is still a lot of uncertainty in markets over factors such as the path of potential Fed rate cuts, the likelihood of further support from China and whether equity valuations are attractive enough to support further gains.

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“We think valuations are fair overall,” Sunil Koul, a strategist at Goldman Sachs Group Inc., said on Bloomberg Television. From here, “it is the underlying earnings distribution that will drive the market.” “We are expecting earnings growth in the region of 15% this year,” he said.

Read more: BlackRock and Amundi expect Japanese stocks' rally to continue

UBS Group AG estimates Chinese state funds have poured more than 410 billion yuan ($57 billion) into onshore stocks this year to support the market. The Swiss bank based its calculations on “excess” transactions from 54 Chinese exchange-traded funds.

Fast fashion company Shein is considering the possibility of moving its initial public offering from New York to London because of hurdles to listing in the U.S., according to people familiar with the matter. Shein was founded in China and is now headquartered in Singapore.

Read more: Debt-addicted companies seek equity capital as interest costs skyrocket

Government bonds rose slightly in Asia after falling on Monday amid heavy corporate issuance and two bond auctions.

Wall Street is watching closely to see how the bond market will manage to offset heavy Treasury and corporate selling given month-end positioning. Blue-chip companies in the U.S. sold a record $172 billion in bonds in February to meet investor demand amid falling borrowing costs.

Elsewhere, Bitcoin briefly climbed above $57,000 for the first time since late 2021, helped by investor demand via exchange-traded funds as well as further buying by MicroStrategy Inc.

In commodities, global benchmark Brent traded above $82 a barrel after rising on Monday, while gold steadied near a two-week high as the market waited for further clues on when the Fed will start cutting interest rates.

Important events this week:

• BOE Governor Andrew Bailey speaks on Tuesday

• US conference. Board of Consumer Confidence, Durable Goods, Tuesday

• Republican and Democratic presidential primaries in Michigan, Tuesday

• Reserve Bank of New Zealand policy decision, Wednesday

• Eurozone economic confidence, consumer confidence, Wednesday

• US wholesale inventories, GDP, Wednesday

• The Fed's Raphael Bostic, Susan Collins and John Williams speak on Wednesday

• The finance ministers and central bank chiefs of the G-20 will meet from Wednesday to Thursday in Sao Paulo

• Germany CPI, unemployment, Thursday

• US consumer income, PCE deflator, initial jobless claims, Thursday

• The Fed's Austan Goolsbee, Raphael Bostic and Loretta Mester speak on Thursday

• China's official PMI, Caixin manufacturing PMI, Friday

• Eurozone S&P Global Manufacturing PMI, CPI, Unemployment, Friday

• BOE chief economist Huw Pill speaks on Friday

• US Construction Spending, ISM Manufacturing, University of Michigan Consumer Sentiment, Friday

• The Fed's Raphael Bostic and Mary Daly speak on Friday

Some of the key moves in the markets:

Shares

• S&P 500 futures fell 0.1% at 6:25 a.m. London time

• Nasdaq 100 futures fell 0.2%

• Nikkei 225 futures (OSE) up 0.1%

• S&P/ASX 200 futures were little changed

• Hong Kong's Hang Seng fell 0.1%

• The Shanghai Composite rose 0.7%

• Euro Stoxx 50 futures fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0848

• The Japanese yen rose 0.1% to 150.50 per dollar

• The offshore yuan was little changed at 7.2108 per dollar

• The Australian dollar was little changed at $0.6546

• The British pound was little changed at $1.2679

Cryptocurrencies

• Bitcoin rose 3% to $56,269.43

• Ether rose 1.3% to $3,228.1

Tie up

• The yield on 10-year government bonds remained little changed at 4.28%

• Japan's 10-year yield was unchanged at 0.685%

• Australia's 10-year yield rose three basis points to 4.13%

raw materials

• West Texas Intermediate crude rose 0.2% to $77.77 a barrel

• Spot gold rose 0.1% to $2,033.85 an ounce

This story was produced with support from Bloomberg Automation.

– With assistance from Jason Scott.

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