Stocks, Bonds Fall As Traders Tweak Rate Cut Hopes: Markets Wrap

(Bloomberg) — Equities in Asia are set for a cautious start Wednesday after US stocks and bonds sold off as investors reined in bets for Federal Reserve rate cuts this year. (Bloomberg) — Equities in Asia are set for a cautious start Wednesday after US stocks and bonds sold off as investors reined in bets for Federal Reserve rate cuts this year. Australian shares and Hong Kong equity futures fell while contracts for Japanese benchmarks edged higher, helped along by a weaker yen.

The Nasdaq Golden Dragon China Index, a gauge of US-listed Chinese shares, fell 3. 8% Tuesday while the S&P 500 eased 0. 4% lower.

The moves weighed on a gauge of global equities, which fell 0. 7% on the day. The bond market responded to a recalibration of Fed rate cut expectations.

Treasuries declined, pushing yields around 12 basis points higher Tuesday for the 10-year note. Swaps market pricing for a rate cut in March inched lower to around 65% from 80% on Friday. The shift reflected comments from Fed Governor Christopher Waller, who urged caution but said a rate cut this year was possible if inflation edges lower toward the central bank’s target.

When the time is right, rates should be lowered “methodically and carefully,” Waller said during a virtual event on Tuesday. “We view his comments emphasizing no need to rush as indicating that he does not expect to push for a March cut,” said Krishna Guha, vice chairman at Evercore ISI. The comments were “consistent with our baseline of a first cut in May or June,” Guha said.

Australian and New Zealand yields also rose early Wednesday, while higher yields supported the greenback. An index of the dollar rose for a third session to levels not seen since the middle of December. The yen weakened to around 147 per dollar on Tuesday.

Further signs of tension in the Red Sea failed to push energy prices higher. The US hit four Houthi missiles in Yemen in a preemptive strike on Tuesday. Shell Plc halted oil tanker transits through the waterway as the conflict intensified.

Crude prices fell Wednesday, extending Tuesday selling pressure. West Texas Intermediate dropped 0. 5% in early Asian trading to around $72.

In Asia, investors were focused on signs of resilience in the Chinese economy. Premier Li Qiang said in comments at the Davos summit in Switzerland that the economy grew at around 5. 2% in 2023, exceeding the official target.

Li said the growth came despite a lack of “massive stimulus” as the government “did not seek short-term growth while accumulating long term risk. ” China data set for release Wednesday includes fourth-quarter gross domestic product, retail sales and December industrial production. Elsewhere in the region, Singapore will release export figures are Indonesia’s central bank will hand down a monetary policy decision.

In US earnings, Morgan Stanley slid amid a warning on lower margins in wealth, while Goldman Sachs Group Inc. rose as profit beat estimates. Boeing Co.

sank on an analyst downgrade. Apple Inc. slipped as the US Supreme Court refused to consider its appeal in an antitrust suit challenging the App Store.

Elsewhere, gold inched lower after a Tuesday decline of more than 1% to trade around $2,026 per ounce and Bitcoin was steady above $43,000. Key events this week: China GDP, property prices, retail sales and industrial production, Wednesday Eurozone CPI, Wednesday US retail sales, industrial production, business inventories, Wednesday Fed issues Beige Book survey of regional economic conditions, Wednesday New York Fed President John Williams speaks, Wednesday ECB President Christine Lagarde and ECB Governing Council members Klaas Knot and Boris Vujcic speak at Davos, Wednesday US housing starts, initial jobless claims, Thursday Republican presidential primary debate in New Hampshire, Thursday ECB President Christine Lagarde participates in Davos panel discussion, Thursday ECB publishes account of December policy meeting, Thursday Atlanta Fed President Raphael Bostic speaks, Thursday Canada retail sales, Friday Japan CPI, tertiary index, Friday US existing home sales, University of Michigan consumer sentiment, Friday ECB President Christine Lagarde and IMF Managing Director Kristalina Georgieva speak in Davos, Friday San Francisco Fed President Mary Daly speaks, Friday India Minister of Petroleum, Natural Gas, Housing and Urban Affairs, Hardeep Singh Puri, discusses the conflict in the Red Sea, Russian oil, and India’s demand for oil. He speaks with Haslinda Amin on Bloomberg Television at the World Economic Forum’s annual meeting in Davos, Switzerland.

Source: Bloomberg Some of the main moves in markets: Stocks S&P 500 futures were little changed as of 8:17 a. m. Tokyo time Nasdaq 100 futures were little changed Nikkei 225 futures rose 0.

6% Hang Seng futures fell 0. 5% Australia’s S&P/ASX 200 fell 0. 2% Currencies The Bloomberg Dollar Spot Index rose 0.

8% The euro was little changed at $1. 0877 The Japanese yen was little changed at 147. 12 per dollar The offshore yuan was little changed at 7.

2180 per dollar Cryptocurrencies Bitcoin fell 0. 5% to $43,236. 04 Ether fell 0.

3% to $2,599. 56 Bonds Australia’s 10-year yield advanced five basis points to 4. 21% Commodities West Texas Intermediate crude fell 0.

6% to $72 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation. More stories like this are available on bloomberg. com ©2024 Bloomberg L.

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