Europe, US futures fluctuate; Asian equities rally: markets wrap
US and European equity futures swung between small gains and losses while Asian stocks climbed as investors wagered that the worst of the global fallout from the American banking sector has passed.
Financials were among the biggest gainers Wednesday in Tokyo and Hong Kong, where the Hang Seng Index rose more than 1%. US stocks rallied into the close Tuesday, helping set the scene for the shift in sentiment in Asia.
Traders were also digesting a slew of economic data from China, where retail sales rose as much as estimated while factory output was fractionally lower than projected. The People’s Bank of China added more liquidity than expected while holding a key lending rate unchanged. Rising housing sales provided one clearly positive signal, reflected in a rally in a mainland property index.
A gauge of dollar strength rose slightly after declining for a fourth-straight day. The two-year Treasury yield rose about seven basis points following a 27 basis point recovery in the rate on Tuesday. It still remains well below levels of mid last week after its biggest three-day slump in decades.
Japan’s 10-year yield climbed while the 20-year rate surged 17 basis points after the central bank offered to buy fewer longer-dated bonds than planned in Wednesday’s operations.
Swaps pricing is back to positioning for the Federal Reserve to lift rates by a quarter percentage point next week after the odds of an increase had slipped to nearly 50-50 on Monday. The closely-watched core consumer price index increased 0.5% in February, slightly ahead of the median estimate of 0.4% and enough to keep pressure on policy makers to hike rates.
“Our view is inflation has peaked and the Fed will do one more rate hike of 25 basis points and that’s it,” Mark Matthews, Asia research head at Bank Julius Baer & Co., said on Bloomberg TV.
He said the regulatory backstop following the collapse of Silicon Valley Bank was very important but wouldn’t necessarily end such incidents. “The ripple-through effect of the era of ultra-low interest rates and then Covid is still very much with us,” Matthews said.
Remarks from ratings companies on the financial sector underscored that sentiment is likely to remain fragile after the biggest American bank failures since the financial crisis.
Moody’s Investors Service cut its outlook on the sector on the heels of the trio of banking collapses over the past few days. First Republic Bank triggered a volatility halt after S&P Global Ratings placed the company on watch negative.
Gold held a drop that took some of the shine off a three-day surge of more than 5%.
Key events this week:
- Eurozone industrial production, Wednesday
- US business inventories, retail sales, PPI, empire manufacturing, Wednesday
- Eurozone rate decision, Thursday
- US housing starts, initial jobless claims, Thursday
- Janet Yellen appears before the Senate Finance Committee, Thursday
- US University of Michigan consumer sentiment, industrial production, Conference Board leading index, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.1% as of 6:45 a.m. London time. The S&P 500 rose 1.7% Tuesday
- Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 2.3% Tuesday
- Euro Stoxx 50 futures were little changed
- Australia’s S&P/ASX 200 Index rose 0.9%
- Japan’s Topix rose 0.7%
- The Shanghai Composite rose 0.6%
- Hong Kong’s Hang Seng Index rose 1.4%
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was little changed at $1.0734
- The Japanese yen fell 0.4% to 134.79 per dollar
- The offshore yuan fell 0.2% to 6.8919 per dollar
- The Australian dollar was unchanged at $0.6682
- The British pound was little changed at $1.2151
- Bitcoin rose 1% to $24,888.47
- Ether rose 0.2% to $1,707.83
- The yield on 10-year Treasuries declined two basis points to 3.67%
- Japan’s 10-year yield advanced six basis points to 0.32%
- Australia’s 10-year yield declined two basis points to 3.43%
- West Texas Intermediate crude rose 1.1% to $72.15 a barrel
- Spot gold fell 0.3% to $1 899.15 an ounce