Stocks rally falters, pound falls as doubt returns: markets wrap

Asian equities trimmed gains while US and European stock futures slumped and the dollar rose as investors returned their focus to inflation and the risk of global recession.

Positive sentiment ebbed during afternoon trading in Asia following early rallies in Japan, China and Australia in the wake of a 2% advance for the S&P 500. Hong Kong’s Hang Seng Tech Index reversed course and headed for its lowest since inception.

The Treasury 10-year yield jumped 10 basis points and the greenback climbed versus all of its Group-of-10 counterparts. Inflation data in Germany underscored the risk to markets of rising consumer prices.

“The markets are very pessimistic. Investors are fairly on the sidelines,” said Julia Raiskin, Asia-Pacific head of markets for Citigroup Inc. “Other than the dollar, there are not many assets that are trading constructively.”

Investors are contending with threats posed by discordant moves from central banks over the past few days, with Federal Reserve officials adamant on further monetary tightening, the BOE unveiling a £65 billion ($71 billion) plan to support government debt and authorities in Asia trying to prop up weakening currencies.

The pound fell about 1%, as did the Australian and New Zealand dollars. The euro also droppedl.

“The central bank is in a very difficult position right now,” Julie Biel, Kayne Anderson Rudnick portfolio manager and senior research analyst, said of the BOE in an interview with Bloomberg TV. “Everyone has been a little bit backed into a corner in seeing the volatility and market reaction.”

Federal Reserve officials continued to hammer home the central bank’s hawkish outlook. The Fed’s Atlanta President Raphael Bostic said he backs raising rates by a further 1.25 percentage points by the end of this year to counter inflation that has been worse than he expected.

European Union officials unveiled fresh economic limits on Russia in response to further annexing of Ukraine. The new round of sanctions would bar sales of Russian oil by third party countries beyond a set price cap. The plan would inflict around $6.7 billion in economic pain on Russia.

China’s onshore yuan advanced for the first time in nine sessions, after the central bank issued a verbal warning against currency speculation.

Key events this week:

• Euro zone economic confidence, consumer confidence, Germany CPI, Thursday
• US initial jobless claims, GDP, Thursday
• Fed’s Loretta Mester, Mary Daly speak at events, Thursday
• China PMI, Friday
• Euro zone CPI, unemployment, Friday
• US consumer income , University of Michigan consumer sentiment, Friday
• Fed’s Lael Brainard and John Williams speak, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.6% as of 7:37 a.m. in London. The S&P 500 climbed 2%
• Nasdaq 100 futures fell 0.9%. The Nasdaq 100 jumped 2%
• The Topix index rose 0.7%
• Australia’s S&P/ASX 200 Index jumped 1.4%
• The Kospi index rose 0.1%
• The Hang Seng Index fell 0.6%
• Shanghai Composite Index fell 0.1%
• Euro Stoxx 50 futures dropped 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.6%
• The Japanese yen fell 0.4% to 144.69 per dollar
• The offshore yuan weakened 0.5% to 7.2010 versus the dollar. Its onshore counterpart strengthened
• The euro fell 0.7% to $0.9669

Cryptocurrencies

• Bitcoin was fell 1% to $19,360
• Ether slipped 1.6% to $1,328

Bonds

• The yield on 10-year Treasuries rose 10 basis points to 3.83%
• Australia’s 10-year yield fell 16 basis points to 3.94%

Commodities

• West Texas Intermediate crude fell 0.8% to $81.52 a barrel
• Gold was at $1 645.66 an ounce