Stocks Dip as Traders Assess Policy Path, Earnings: Markets Wrap

(Bloomberg) — European stocks and US equity futures retreated while bond yields rose as traders assessed the latest corporate earnings reports against the backdrop of yet another hot inflation print from one of the world’s major economies.

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The Stoxx Europe 600 index slipped about 0.3%, with the technology sector leading the decline. ASML Holding NV dropped as much as 4.8% after the Dutch chip maker’s earnings report raised concerns about its 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.

The UK two-year yield jumped as much as 15 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. The Treasury 10-year yield rose 4 basis points. A gauge of the dollar gained.

Amid continuing hawkish talk from policy makers, investors are monitoring earnings reports for signs of how central banks’ attempts to stifle inflation are affecting economic activity. Results from major US lenders so far have been mixed: Goldman Sachs Group Inc. failed to capitalize on Wall Street’s fixed-income boom, contributing to firmwide revenue that trailed estimates. Bank of America Corp. beat profit expectations. Morgan Stanley is due to report later today.

European Central Bank Chief Economist Philip Lane said Tuesday that another increase in interest rates would be appropriate in May. 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 said he favors getting rates into a 5.5%-to-5.75% range, according to Reuters.

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.”

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 0.3% as of 10:27 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 0.3%
The euro fell 0.3% to $1.0943
The Japanese yen fell 0.6% to 134.95 per dollar
The offshore yuan fell 0.4% to 6.9068 per dollar
The British pound was little changed at $1.2434

Cryptocurrencies

Bitcoin fell 3.9% to $29,224.88
Ether fell 5.3% to $1,981.9

Bonds

The yield on 10-year Treasuries advanced four basis points to 3.61%
Germany’s 10-year yield advanced three basis points to 2.51%
Britain’s 10-year yield advanced nine basis points to 3.84%

Commodities

Brent crude fell 2% to $83.10 a barrel
Spot gold fell 1.4% to $1,977.76 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Tassia Sipahutar and Sagarika Jaisinghani.