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Treasuries Fall on Powell, Chinese Shares Swing: Markets Wrap

Treasuries Fall on Powell, Chinese Shares Swing: Markets Wrap
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(Bloomberg) — Treasuries fell, extending Friday’s selloff after Federal Reserve Chair Jerome Powell said policymakers will likely wait beyond March before cutting interest rates. Chinese stocks saw more wild swings after signals of official support.

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US 10-year yields climbed five basis points in Asia after jumping 14 basis points Friday following stronger-than-expected payroll data. The “danger of moving too soon is that the job’s not quite done,” Powell said in an interview on CBS’s 60 minutes that was screened Sunday in the US.

The Treasury declines sent waves across Asian bond markets, pushing down government debt in Australia and New Zealand. Chinese government bonds were an outlier, where 10-year yields fell around two basis points.

Chinese stocks saw another volatile session as investors assessed the latest pledges by policymakers to stabilize the slumping equity market. The China Securities Regulatory Commission issued another statement Monday, saying it would take measures to prevent stock pledging risks. On Sunday it had pledged to act to prevent abnormal fluctuations, and guide more funds into the market. The benchmark CSI 300 index swung between losses of 2.1% and gains of 1.7%.

“Whether or not today marks the floor to Chinese equities is yet to be seen but it sure feels as though we’re bumping along the bottom as policymakers have signaled they no longer want to see any further declines,” said David Chao, a strategist at Invesco Asset Management in Singapore.

Stock benchmarks in Australia and South Korea declined as did US equity futures after the S&P 500 Index climbed 1.1% to a new record on Friday. A strong run of performances for the US benchmark comes as February begins — historically one of the rockiest month of the year for US shares. Contracts for European shares were little changed.

The dollar strengthened against most of its major peers after Powell’s hawkish comments. The yen crept lower to trade at around 148 per dollar.

Investor bets for a rate cut in March by the Fed tumbled Friday to around 20% from almost 40% on Thursday, as economic resilience reduces the likelihood of imminent policy easing.

Despite forecasts for a March rate cut weakening, “this market still expects five rate cuts this year,” Ed Yardeni, president of Yardeni Research wrote in a note. “Fed officials are likely to continue to push back against that notion of so much cutting.”

Oil rose as the US vowed more strikes against Iran’s forces and proxies, while the Houthis promised to retaliate against bombardments over the weekend. Gold weakened.

Former US President Donald Trump also signaled he may impose a tariff on Chinese goods of more than 60% if elected, in a fresh round of hawkish rhetoric aimed at the largest supplier of goods to the US.

Key events this week:

  • Eurozone S&P Global Services PMI, PPI, Monday

  • Australia rate decision, Tuesday

  • Eurozone retail sales, Tuesday

  • Germany factory orders, Tuesday

  • Cleveland Fed President Loretta Mester, Philadelphia Fed President Patrick Harker speak, Tuesday

  • Bank of England Deputy Governor Sarah Breeden speaks, Wednesday

  • Fed Governor Adriana Kugler, Richmond Fed President Tom Barkin speak, Wednesday

  • China PPI, CPI, Thursday

  • Pakistan general election, Thursday

  • ECB Chief Economist Philip Lane, ECB Governing Council member Pierre Wunsch speak, Thursday

  • European Central Bank publishes economic bulletin, Thursday

  • US initial jobless claims, Thursday

  • US Treasury Secretary Janet Yellen speaks at a Senate banking committee hearing, Thursday

  • Australian Reserve Bank Governor Michele Bullock delivers parliamentary testimony, Friday

  • China aggregate financing, money supply, new yuan loans, Friday

  • Germany CPI, Friday

Some of the main moves in markets:

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Stocks

  • S&P 500 futures fell 0.2% as of 6:30 a.m. London time. The S&P 500 rose 1.1% on Friday

  • Nasdaq 100 futures fell 0.2%. The Nasdaq 100 rose 1.7%

  • Euro Stoxx 50 futures were little changed

  • Japan’s Topix index rose 0.7%

  • Hong Kong’s Hang Seng Index rose 0.2%

  • China’s Shanghai Composite Index fell 0.6%

  • Australia’s S&P/ASX 200 Index fell 1%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.1%

  • The euro was little changed at $1.0781

  • The Japanese yen was little changed at 148.31 per dollar

  • The offshore yuan was little changed at 7.2123 per dollar

  • The Australian dollar was little changed at $0.6515

  • The British pound fell 0.1% to $1.2614

Cryptocurrencies

  • Bitcoin fell 0.1% to $42,702.96

  • Ether fell 0.2% to $2,295.59

Bonds

  • The yield on 10-year Treasuries advanced four basis points to 4.06%

  • Japan’s 10-year yield advanced 5.5 basis points to 0.715%

  • Australia’s 10-year yield advanced 12 basis points to 4.10%

Commodities

  • West Texas Intermediate crude rose 0.3% to $72.53 a barrel

  • Spot gold fell 0.5% to $2,030.14 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Richard Henderson and Ishika Mookerjee.

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