Saturday, January 22

Stocks and futures tumble amid a rally in Treasury yields: markets wrap up


US stocks and index futures tumbled as investors reassessed valuations in the wake of a surge in Treasury bond yields. Oil is heading for multi-year highs amid a global supply crisis.

Contracts on the Nasdaq 100 index slumped 1.4%, indicating that the heavy tech indicator may extend Monday’s losses. S&P 500 futures fell 0.8%. The five-year Treasury yield rose above 1.03% and the 10-year yield reached 1.55% as investors appreciated the start of the Federal Reserve’s gradual reduction. Brent crude futures topped $ 80 a barrel and West Texas Intermediate extended its rally to a sixth day.

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Federal Reserve officials have issued increasingly aggressive signals in recent days as bottlenecks in the global supply chain threaten to keep inflation high. China’s slowdown in growth and a debt crisis in the nation’s housing market have also fueled confidence in risk. All of this has caused investors to abandon expensive investments, such as tech stocks.

“Central bankers have established how they want to normalize monetary policy for some time,” Chris Iggo, investment director for basic investments at AXA Investment Managers, said in a note. “That process could start soon. Doing so has the potential to cause some volatility in rates and stocks. ”

President Jerome Powell said Monday that the inflation test to reduce Fed bond purchases has been met, while the employment test “has almost been met.” Fed Governor Lael Brainard said the labor market could soon meet its criteria for reducing asset purchases, while New York Fed Chairman John Williams noted that moderation in the economy could soon be justified. purchase of bonds.

Brent crude futures rose to a three-year high on Tuesday, while WTI contracts traded above $ 76. A flurry of bullish price predictions by banks and traders, gains in natural gas and speculation that the energy industry is not investing enough in fossil fuels signaled a global crisis. Goldman Sachs Group Inc. said that Brent could hit $ 90 by the end of the year as the market was in a bigger deficit than many thought.

The dollar jumped to a five-week high, posting gains against all its peers in the Group of 10. While concerns about the coronavirus may have subsided, uncertainty about global growth and monetary policy has given more ammunition to the bullish dollar.

European stocks fell as investors turned away from more expensive growth stocks. Tech stocks led losses, while energy companies capped the benchmark Stoxx 600 decline.

Hong Kong shares advanced, defying Asian losses, after China’s central bank said it will work to safeguard the “healthy” development of the housing market amid the crisis in China’s Evergrande Group.

The gloomy mood spread to the cryptocurrency market, with Bitcoin falling for a second day and trading around $ 42,000 each.

Here are some events to watch this week:

  • Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen to testify at a Senate Banking Committee hearing on Tuesday
  • European Central Bank President Christine Lagarde speaks Tuesday at the ECB Forum on Central Banking
  • Japan’s ruling party votes to choose leader, Wednesday
  • Central bank heads Andrew Bailey (BOE), Haruhiko Kuroda (BOJ), Christine Lagarde (ECB) and Jerome Powell (Fed) take part in a panel at the ECB Forum, Wednesday
  • House Financial Services Committee hearing on the Fed, the Treasury’s response to the pandemic, Thursday
  • China Caixin Manufacturing PMI, Non-Manufacturing PMI, Thursday
  • Michigan Sentiment Univ., ISM Manufacturing, US Construction Spending, Personal Spending / Income Friday

Some of the main movements in the markets:

Stocks

  • The Stoxx Europe 600 fell 1.3% at 9:20 am London time
  • S&P 500 futures fell 0.8%
  • Nasdaq 100 futures fell 1.4%
  • Dow Jones Industrial Average futures fell 0.4%
  • The MSCI Asia Pacific Index fell 0.4%
  • MSCI Emerging Markets Index fell 0.1%

Currencies

  • Bloomberg’s dollar spot index rose 0.2%
  • The euro fell 0.1% to $ 1.1681.
  • The Japanese yen fell 0.3% to 111.28 per dollar
  • The offshore yuan changed little to 6.4608 per dollar.
  • The British pound fell 0.2% to $ 1.3672.

Captivity

  • The 10-year Treasury yield advanced six basis points to 1.55%.
  • Germany’s 10-year yield advanced four basis points to -0.18%
  • UK 10-year yield advanced five basis points to 1.00%

Raw Materials

  • Brent crude rose 0.9% to $ 80.24 a barrel
  • Spot gold fell 0.5% to $ 1,741.34 an ounce

© 2021 Bloomberg


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