Financial basis

Stocks and Futures Fall as Yields Rise; Yen Tumbles: Market Recap

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(Bloomberg) – U.S. index futures fell along with stocks in Europe, while bonds around the world tumbled as investors weighed the prospect of aggressive policy action to curb inflation.

Contracts on the S&P 500 and Nasdaq 100 erased early gains to trade lower after US stocks ended little changed on Monday. Treasuries extended their declines, with the 10-year yield hitting a new three-year high. German and British 10-year yields hit their highest level since 2015 as bonds across Europe plunged. The dollar rose slightly.

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Healthcare and consumer goods companies led the Stoxx Europe 600 index down more than 1%, with technology stocks also underperforming. Energy shares were led higher by TotalEnergies SE following a positive report in the first quarter.

Investors – already betting on a nearly half-point hike in the Federal Reserve rate next month – are reassessing tightening expectations after St. Louis Fed President James Bullard said hikes of up to 75 basis points – although not the base case – should not be ruled out. The last increase of such magnitude dates back to 1994.

Supply chain disruptions from China lockdowns and wartime commodity flows are keeping pressure on central banks to rein in runaway prices at a time when global growth is expected to slow. The World Bank has cut its forecast for global economic expansion this year following the Russian invasion.

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“Bullard’s comments really sum up the dilemma that many central banks around the world have found themselves in,” said Jeffrey Halley, senior market analyst at Oanda. “Fortunately, they have plenty of excuses in the form of the pandemic and the war in Ukraine. Central banks can now catch up, increase aggressively and run the risk of recessions. Getting over the pain and getting over it may be the least worst option.

Stocks rose in Japan as the yen extended its longest losing streak in at least half a century. Hong Kong tech names fell on ongoing regulatory concerns. China fell as investors weighed measures to combat economic headwinds from Covid-led lockdowns.

In China, markets are also awaiting the release of benchmark lending rates from banks on Wednesday after the People’s Bank of China cut the reserve requirement ratio for most banks on Friday but refrained from cutting interest rates. interest.

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The latest policy measures “really highlighted that easing is needed,” Gareth Nicholson, Nomura’s chief investment officer and head of discretionary portfolio management, told Bloomberg Television. “The markets think we haven’t done enough and they’re going to have to step things up.”

Meanwhile, Ukrainian President Volodymyr Zelenskiy said on Monday that Russian forces have begun the campaign to conquer the Donbass region in eastern Ukraine as Moscow continues to move troops and equipment to that part of the country. .

Will value stocks finally outperform their growth counterparts? What will be the best performing emerging stock market for the rest of 2022? “Rotations” is the theme of this week’s MLIV Pulse survey. Participation takes one minute and is anonymous, so please click here to get involved.

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What to watch this week:

Earnings include American Express, China Telecom, IBM, Johnson & Johnson, Netflix, TeslaChicago Fed President Charles Evans to speak, Tuesday’s EIA Crude Oil Inventories Report, Prime Lending Rates Wednesday in China, Wednesday’s Federal Reserve Beige Book, Wednesday’s French presidential election debate, San Francisco Fed Chair Mary Daly, Chicago Fed Chair Charles Evans must take the floor Wednesday Eurozone CPI, US Initial Jobless Claims, Thursday Fed Chairman Jerome Powell, ECB President Christine Lagarde discuss the global economy at an IMF event, Thursday PMI manufacturers: Eurozone, France, Germany, UK, Friday Bank of England’s Andrew Bailey will speak, Friday

Some of the major movements in the markets:

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Shares

S&P 500 futures fell 0.3% at 5:55 a.m. PTNasdaq 100 futures fell 0.4%

Currencies

The Bloomberg Dollar Spot Index rose 0.1% The euro rose 0.2% to $1.0800 The pound was little changed at $1.3028 The Japanese yen fell 1% to 128.32 for a dollar

Obligations

The yield on 10-year Treasury bills rose three basis points to 2.89%

Merchandise

West Texas Intermediate crude fell 1.5% to $106.58 a barrel Gold futures fell 0.4% to $1,979.20 an ounce

©2022 Bloomberg LP

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