US Stock Futures, Asian Stocks Rise as Quiet Yields Set in: Markets Wrap

(Bloomberg) – U.S. stock futures rose along with Asian stocks as relative calm returned to markets on Thursday after a turbulent day of losses on Wall Street.

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An index of Asian stocks rose more than 1% as ads rallied in Hong Kong and mainland China. Euro Stoxx 50 contracts fell slightly as investors waited for rate decisions from the Bank of England and its counterparts in Switzerland and Norway.

The tone during the Asian session was in sharp contrast to that in the US on Wednesday, as traders received a double dose of stress that reversed an initial rally in equities following the Federal Reserve’s expected 25 basis point rate hike.

Treasury Secretary Janet Yellen told lawmakers the government was not considering “blanket” deposit insurance to stabilize the banking system, sending shares in the sector plummeting. Around the same time, Fed Chair Jerome Powell has balked at betting on rate cuts this year, saying he’s prepared to keep raising borrowing costs until inflation shows signs of cooling.

Dollar weakness, extending its series of declines into a sixth day, was seen as helping to isolate Asia from some of the global banking turmoil, particularly in emerging markets. The greenback fell against all of its Group of Ten currency counterparts.

Two-year government bond yields fell about six basis points, adding to Wednesday’s 23 basis point plunge. Government bond yields fell in Australia and New Zealand, with moves reaching around 10 basis points in politically sensitive shorter maturities.

While markets are in a “higher volatility regime” these days amid uncertainty about the outlook for interest rates and economic growth, some moderation is possible on Thursday, according to Australia & New Zealand Banking Group strategist John Bromhead. “I suspect now the big risk event is out of the way, risk appetite can improve as the day progresses,” he said.

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The swap market shows investors divided on the likelihood that Fed officials will raise their benchmark by another 25 basis points in May. Despite Powell’s forecast, expectations for rate cuts have tightened, with the market suggesting the effective fed funds rate will fall to around 4.1% in December.

“I wouldn’t expect the market to accept these rate cuts in the short term and could very well be pricing in more cuts if the data worsens from here,” Matthew Hornbach, Morgan Stanley’s global head of macro strategy, told Bloomberg Television.

Powell himself, however, said when asked that officials are “just not seeing” any cuts this year and will raise them higher than expected if necessary. “Rate cuts are not in our base case,” he said.

Elsewhere in markets, oil fell as investors weighed developments at the Fed and digested a mixed US supply and demand snapshot. Gold rose and bitcoin rose.

Chinese internet giant Tencent Holdings Ltd. was a standout performer in Hong Kong, up more than 6% amid strong online ad sales. Chinese markets generally featured quiet strength Thursday amid recent unrest in Europe and America.

Separately, investors were eagerly awaiting another report from Hindenburg Research, the US short that targeted Gautam Adani’s group earlier in the year. There were no details on the subject of the new report.

Important events this week:

• Eurozone Consumer Confidence, Thursday

• BOE interest rate decision, Thursday

• Interest rate decision and press conference by the Swiss National Bank, Thursday

• US New Home Sales, Initial Jobless Claims, Thursday

• US Treasury Secretary Janet Yellen testifies before a budget subcommittee on Thursday

• Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday

• US Durables, Friday

Some of the key movements in the markets:

Shares

• S&P 500 futures were up 0.5% as of 6:50 am London time. The S&P 500 fell 1.7%.

• Nasdaq 100 futures were up 0.7%. The Nasdaq 100 fell 1.4%

• Euro Stoxx 50 futures down 0.4%

• The Japanese Topix fell 0.3%

• Australia’s S&P/ASX 200 index fell 0.7%

• Hong Kong’s Hang Seng index rose 1.7%

• China’s CSI 300 up 0.9%

currencies

• The Bloomberg Dollar Spot Index fell 0.5%

• The euro rose 0.6% to $1.0922

• The Japanese yen rose 0.5% to 130.73 per dollar

• The offshore yuan rose 0.6% to 6.8197 per dollar

• The Australian dollar rose 0.8% to $0.6740

• The British pound rose 0.5% to $1.2331

cryptocurrencies

• Bitcoin rose 1.2% to $27,711.24

• Ether was up 1.1% to $1,756.19

Bind

• The 10-year government bond yield was little changed at 3.44%.

• Japan’s 10-year yield fell 2.5 basis points to 0.295%

• Australia’s 10-year yield fell seven basis points to 3.29%

raw materials

• West Texas Intermediate Crude fell 1% to $70.22 a barrel

• Spot gold rose 0.5% to $1,979.45 an ounce

This story was created with the support of Bloomberg Automation.

–Assisted by Rita Nazareth, Matthew Burgess and Georgina Mckay.

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