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European Futures Slip as High Yields Sour Mood: Markets Wrap (Bloomberg) – Yahoo Finance

(Bloomberg) — European stocks are set to follow selling pressure from Asia as U.S. Treasury yields hover near this year’s highs, keeping risk sentiment in check.

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Euro Stoxx 50 futures fell 0.4% and U.S. stock futures also fell. The MSCI Asia Pacific Index fell to its lowest in three weeks, with South Korean and Japanese stocks bearing the brunt of the decline.

Latest comments from Federal Reserve officials have rekindled doubts about the timing of interest rate cuts, sending global stock markets on track for their worst week since mid-April. Rising bond yields have added to anxiety, and Treasuries fell across the curve in yesterday’s trading after weak demand for a $44 billion offering of seven-year notes.

Investors are bracing for a series of inflation reports from the United States and Europe on Friday to scrutinize the outlook for monetary policy.

“The market is under the spell of the bond genie and high yields,” said Tony Sycamore, market analyst at IG Australia. “The focus is now shifting to managing downside risks if tomorrow’s US or European inflation data proves stronger than expected.”

Ten-year Treasury yields rose 6 basis points in the previous session but were slightly lower in Asian markets after weak auction results stoked concerns that yields could rise as the Fed finances the U.S. budget deficit at a time when it is in no rush to cut interest rates. Australian yields rose.

A gauge of the dollar’s strength rose for a third straight day, weighing on Asian currencies.

In Japan, the yen rose after falling above 157.52 yen to the dollar on Wednesday, below the levels that sparked a recent string of questionable behavior. Japan’s 10-year government bonds reversed earlier losses.

Meanwhile, China’s domestic yuan was little changed after falling on Wednesday to its lowest level since November, while South Africa’s rand continued to weaken as vote counting for the country’s general election accelerated.

“The rise in bond yields is primarily due to bond supply and continued large budget deficits, and may not be due to concerns about inflation or a booming economy,” said Eric Johnston of Cantor Fitzgerald.

In New Zealand, the new government followed through on its election promise by cutting taxes in its first budget, even as the Treasury forecast a widening budget deficit and a slow return to a surplus.

In the corporate world, Chinese authorities are preparing to impose a record fine on PricewaterhouseCoopers over its audit work for China Evergrande Group, according to people familiar with the matter. Brookfield is in exclusive talks to buy a majority stake in French renewable energy developer Neoen, valuing the company at about 6.1 billion euros.

In commodity markets, crude oil is stabilizing after dropping on Wednesday as traders look to U.S. inventory data and the weekend OPEC+ meeting for further clarity on the supply and demand outlook.

Major events this week:

  • Eurozone economic confidence, unemployment rate, consumer confidence on Thursday

  • US initial jobless claims, GDP on Thursday

  • Fed’s John Williams and Laurie Logan to speak Thursday

  • Japan unemployment rate, Tokyo consumer price index, industrial production, retail sales, Friday

  • China manufacturing and non-manufacturing PMI, Friday

  • Eurozone Consumer Price Index, Friday

  • U.S. Consumer Income, Expenditures and PCE Deflator Friday

  • Federal Reserve President Raphael Bostic to speak on Friday

Some of the key market developments:

stock

  • S&P 500 futures were down 0.6% as of 2:23 p.m. Tokyo time.

  • Nasdaq 100 futures fell 0.7%

  • Japan’s TOPIX falls 0.6%

  • Australia’s S&P/ASX 200 fell 0.4%

  • Hong Kong’s Hang Seng Index fell 1.4%

  • The Shanghai Composite Index fell 0.6%

  • Euro Stoxx 50 futures fell 0.4%

currency

  • The Bloomberg Dollar Spot Index was little changed.

  • The euro was little changed at 1.0791 dollars

  • The Japanese yen rose 0.4% to 157.07 yen to the dollar.

  • The offshore yuan was little changed at 7.2676 per dollar.

Cryptocurrency

  • Bitcoin rose 0.9% to $68,010.32.

  • Ether rose 0.6% to $3,772.56.

Bonds

merchandise

  • West Texas Intermediate crude fell 0.2% to $79.11 a barrel.

  • Spot gold fell 0.2% to $2,333.95 an ounce.

This story was produced with assistance from Bloomberg Automation.

–Cooperation: Masaki Kondo

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