Stocks Slip, Bond Yields Rise With Prices in Focus: Markets Wrap

(Bloomberg) —

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Stocks in Europe retreated along with US equity futures, while bond yields rose as yet another a sticky inflation print in the the UK brought price pressures back to the fore ahead of equivalent data for the euro region.

The Stoxx Europe 600 index slipped about 0.4%, with the technology sector leading the decline. ASML Holding NV dropped more than 3% after the Dutch chip maker’s earnings report raised concerns about the demand outlook. Contracts on the rates-sensitive Nasdaq 100 fell about 0.7%, while those on the S&P 500 were down 0.5% ahead of the next batch of earnings reports by US banks.

Treasury two-year yields, which are more reactive to imminent policy moves than longer maturities, climbed 5 basis points to 4.24%, while the yield on 10-year bonds rose 4 basis points. A gauge of the dollar gained. The UK two-year yield jumped 13 basis points and the country’s stock benchmark underperformed after data showed inflation beat estimates in March, prompting traders to ramp up bets on further Bank of England interest-rate hikes.

Investors will be monitoring price data from the euro area that will determine European Central Bank’s monetary policy path. ECB Chief Economist Philip Lane said Tuesday another increase in interest rates would be appropriate in May, but a more detailed picture of inflation would be needed.

“Two more hikes from here, getting to 3.5%, that will get the ECB to a stance that we think would be close to where it needs to be given the current circumstances,” Wouter Sturkenboom, chief investment strategist for EMEA & Asia Pacific at Northern Trust Asset Management, said on Bloomberg Television.

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MSCI Inc.’s Asia Pacific Index declined 0.4%, while the Hang Seng China Enterprises Index slid as much as 1.5% before paring losses. Futures on the S&P 500, along with those on the Nasdaq 100 and Euro Stoxx 50 all declined.

Over in the US, Bank of Atlanta President Raphael Bostic told CNBC he favors raising interest rates one more time and then holding them above 5% for some time to curb inflation. His St. Louis counterpart James Bullard told Reuters he favors getting rates into a 5.5%-to-5.75% range. The benchmark currently sits between 4.75% and 5%.

Swaps are pricing in a quarter-point hike by the Fed in May, with rate cuts starting to take place in July.

“That might be too early,” Jonathan Liang, head of investment specialists for Asia ex-Japan at JPMorgan Asset Management, said on Bloomberg Television. “There could be a pivot, maybe towards the end of this year, but not maybe as soon as what the market is currently pricing.”

Despite the hawkish comments by the Fed officials, the Cboe Volatility Index stayed at the lowest since January 2022, remaining below 17. Bank of America’s GFSI Market Risk Index — a gauge of global volatility across assets — held near the lowest since February 2022.

Elsewhere in markets, Bitcoin fell below the closely watched $30,000 level. Oil declined as investors weighed signs of shrinking US crude stockpiles against concerns over an uneven demand recovery.

Gold dipped and iron ore declined after Chinese authorities vowed to curb “unreasonable” price gains in their latest move to crack down on market speculation.

Key events this week:

• Fed releases Beige Book, Wednesday

• Fed’s John Williams gives a speech, Wednesday

• Fed’s Austan Goolsbee is interviewed on NPR, Wednesday

• China loan prime rates, Thursday

• Eurozone consumer confidence, Thursday

• US initial jobless claims, existing home sales, index of leading economic indicators, Thursday

• ECB issues report on March policy meeting, Thursday

• Fed’s Christopher Waller speaks at cryptocurrency-focused event, Thursday

• Fed’s Patrick Harker speaks on “monetary policy and housing”, Thursday

• Fed’s Loretta Mester discusses the economic and policy outlook, Thursday

• Fed’s Raphael Bostic discusses regional and national economic conditions, Thursday

• Fed’s Michelle Bowman and Lorie Logan speak at event, Thursday

• PMIs for Eurozone, Friday

• Japan CPI, Friday

• Fed’s Lisa Cook discusses economic research at an event, Friday

Some of the main moves in the market:

Stocks

• The Stoxx Europe 600 fell 0.4% as of 9:14 a.m. London time

• S&P 500 futures fell 0.5%

• Nasdaq 100 futures fell 0.7%

• Futures on the Dow Jones Industrial Average fell 0.4%

• The MSCI Asia Pacific Index fell 0.8%

• The MSCI Emerging Markets Index fell 1%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro fell 0.2% to $1.0954

• The Japanese yen fell 0.5% to 134.83 per dollar

• The offshore yuan fell 0.4% to 6.9089 per dollar

• The British pound rose 0.2% to $1.2445

Cryptocurrencies

• Bitcoin fell 3.1% to $29,484.95

• Ether fell 3.1% to $2,028.38

Bonds

• The yield on 10-year Treasuries advanced four basis points to 3.62%

• Germany’s 10-year yield advanced four basis points to 2.51%

• Britain’s 10-year yield advanced nine basis points to 3.83%

Commodities

• Brent crude fell 1.2% to $83.76 a barrel

• Spot gold fell 1% to $1,984.60 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Naoto Hosoda and Tassia Sipahutar.

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