US, Europe Futures Retreat; Dollar Up With Yields: Markets Wrap

(Bloomberg) — US and European equity futures declined along with Asian stocks on Tuesday as investors weighed the prospect of central banks tightening policy more than previously expected to tame inflation.

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The dollar ticked higher, advancing against peers in the Group-of-10 currency basket, as Treasury yields climbed in Asia after trading was closed for a US holiday on Monday.

Contracts for the S&P 500 and the Nasdaq 100 futures lost more than 0.3%, indicating further downward pressure for US stocks after declines last week.

The MSCI Asia Pacific Index slid 0.7%, with Hong Kong-listed technology shares leading declines. HSBC Holdings Plc shares slid even after the company beat profit forecasts in fourth-quarter results.

Mainland China stocks fluctuated after the CSI 300 benchmark posted its best one-day gain since November on Monday, when Goldman Sachs Group Inc. strategists said the nation’s equities could surge about a fifth from current levels this year.

The Japanese 10-year yield briefly rose above the central bank’s 0.5% yield curve control target for the first time since January. Investors are readying to hear from Kazuo Ueda, the nominee for the Bank of Japan governorship, who is due to face confirmation hearings in parliament on Friday.

Yield on the policy-sensitive two-year US Treasuries was near the highest since November as traders awaited the release of the PCE deflator, which is the Federal Reserve’s preferred measure of inflation, later this week.

“While some will focus on US-China relations and point to upcoming meetings between the Chinese and Russians this week, the repricing and push higher in interest rate expectations will eventually open up the downside in equity markets,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note.

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Benchmark two-year yields on New Zealand government bonds rose Tuesday while Australian yields ticked higher. Economists expect the Reserve Bank of New Zealand to hike its policy rate by 50 basis points on Wednesday.

Meanwhile, economic data that has come out so far “certainly puts a lot of cold water” on the argument that the Federal Reserve may pause or even cut rates soon, Chuck Cumello, president and chief executive officer of Essex Financial Services, said on Bloomberg Radio. “We’re in for a more volatile ride and I think the market is finally waking up to rates are going to stay higher for longer,” he said.

Elsewhere, trading of oil was choppy as investors weighed the possibility of further monetary tightening against signs of improving demand from China. Gold was little changed.

Key events this week:

• Earnings for the week are scheduled to include: Alibaba, Anglo American, AXA, BAE Systems, Baidu, BASF, Danone, Deutsche Telekom, Holcim, Home Depot, Hong Kong Exchanges & Clearing, Iberdrola, Lloyds Banking Group, Moderna, Munich Re, Newmont, Nvidia, Rio Tinto, Walmart, Warner Bros Discovery

• PMIs for Japan, Eurozone, UK, US, Tuesday

• US existing home sales, Tuesday

• US MBA mortgage applications, Wednesday

• The Federal Reserve minutes from Jan. 31-Feb. 1 policy meeting, Wednesday

• Eurozone CPI, Thursday

• US GDP, initial jobless claims, Thursday

• Atlanta Fed President Raphael Bostic speaks, Thursday

• G-20 finance ministers and central bank governors meet in India, Thursday-Friday

• Japan CPI, Friday

• BOJ governor-nominee Kazuo Ueda appears before Japan’s lower house, Friday

Some of the main moves in markets as of 6:47 a.m. London time:

Stocks

• S&P 500 futures fell 0.4%

• Japan’s Topix fell 0.1%

• Hong Kong’s Hang Seng fell 1.3%

• The Shanghai Composite rose 0.4%

• Euro Stoxx 50 futures fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro fell 0.1% to $1.0671

• The Japanese yen fell 0.2% to 134.46 per dollar

• The offshore yuan fell 0.2% to 6.8760 per dollar

• The British pound fell 0.1% to $1.2027

Cryptocurrencies

• Bitcoin rose 0.8% to $24,975.46

• Ether rose 0.1% to $1,703.22

Bonds

• The yield on 10-year Treasuries advanced three basis points to 3.85%

• Japan’s 10-year yield was little changed at 0.50%

• Australia’s 10-year yield was little changed at 3.81%

Commodities

• West Texas Intermediate crude was little changed

• Spot gold fell 0.1% to $1,838.69 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Akshay Chinchalkar.

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