Global equities extended losses as Treasury yields surged after US inflation data bolstered bets on Federal Reserve rate hikes. The latest data on continued weakness in China’s economy added to the gloom.
(Bloomberg) — Global equities extended losses as Treasury yields surged after US inflation data bolstered bets on Federal Reserve rate hikes. The latest data on continued weakness in China’s economy added to the gloom.
MSCI’s All Country World Index fell for a second day, with major Asian benchmark indexes in the red. Hong Kong shares underperformed and mainland Chinese shares slipped after both consumer and producer prices came in below estimates, a sign that the country’s economy still faces drags despite the government rolling out a series of support measures. European equity futures pointed to a lower open.
Swap contracts pushed the odds of another quarter-point Fed hike to about 40% — from closer to 30% Wednesday after US consumer price data. Investors also await JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. results as they kick off the earnings season Friday.
Some of the biggest US banks are poised to write off more bad loans than since the early days of the pandemic as higher-for-longer interest rates and a potential economic downturn put borrowers in a bind. Data from US University of Michigan consumer sentiment is also due later Friday.
Asian equities were also hurt as China’s trade data was only slightly better than expectation. The authorities are now also considering forming a state-backed stabilization fund to shore up confidence in the nation’s $9.5 trillion stock market.
Read more: China Weighs New Stabilization Fund to Prop Up Stock Market
Treasuries gained in Asia after dropping across the curve in the previous session, with the yield on the 30-year rate surging as much as 19 basis points after a $20 billion auction of the securities drew weak demand.
The dollar edged down after strengthening against all of its Group-of-10 peers Thursday following the increase in Treasury yields. The yen inched closer to the 150 mark.
The Fed will want flexibility optionality around an additional rate hike, “just given the fact that inflation could stall out at a higher level,” Nadia Lovell, senior equity strategist at UBS Global Wealth Management, said on Bloomberg Television. “It’s a much easier to tilt hawkish in an environment where economic growth is strong and then dial that back if you need to than to be dovish just in case inflation surprises to the upside.”
Elsewhere, oil headed for a modest weekly gain as fears over the Israel-Hamas conflict were offset by signs of flagging demand. Gold eged higher.
Key events this week:
- Eurozone industrial production, Friday
- US University of Michigan consumer sentiment, Friday
- Citigroup, JPMorgan, Wells Fargo, BlackRock results as the quarterly earnings season kicks off, Friday
- G20 finance ministers and central bankers meet as part of IMF gathering, Friday
- ECB President Christine Lagarde, IMF Managing Director Kristalina Georgieva speak on IMF panel, Friday
- Fed’s Patrick Harker speaks, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.1% as of 6:52 a.m. London time. The S&P 500 fell 0.6%
- Nasdaq 100 futures were little changed. The Nasdaq 100 dropped 0.4%
- Japan’s Topix fell 1.7%
- Hong Kong’s Hang Seng fell 2.4%
- The Shanghai Composite fell 0.8%
- Euro Stoxx 50 futures fell 0.3%
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.2% to $1.0545
- The Japanese yen rose 0.1% to 149.65 per dollar
- The offshore yuan was little changed at 7.3076 per dollar
- The Australian dollar was little changed at $0.6320
- The British pound rose 0.2% to $1.2204
- Bitcoin rose 0.3% to $26,811.5
- Ether rose 0.3% to $1,540.46
- The yield on 10-year Treasuries declined four basis points to 4.65%
- Japan’s 10-year yield was unchanged at 0.755%
- Australia’s 10-year yield advanced nine basis points to 4.46%
- West Texas Intermediate crude rose 1% to $83.73 a barrel
- Spot gold rose 0.5% to $1,877.57 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu and Georgina McKay.
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