European, US Stock Futures Rise as Treasuries Fall: Markets Wrap

European and US equity futures climbed alongside Asian stocks Friday while Treasuries fell as investors weighed commentary from central bankers on the path forward for interest rates.

(Bloomberg) — European and US equity futures climbed alongside Asian stocks Friday while Treasuries fell as investors weighed commentary from central bankers on the path forward for interest rates.

Futures for the Euro Stoxx 50 rose 0.4% and contracts for the S&P 500 edged higher, breaking with sentiment that saw the US index decline for a third session on Thursday. Shares in Japan, Hong Kong, China and Australia all rose.

Treasuries sold off with the benchmark 10-year yield adding two basis points in a further rise following a small advance Thursday. The two-day move trimmed some of the sharp drop in yields earlier in the week.

Traders seeking more cues are awaiting European Central Bank President Christine Lagarde, who appears later Friday at Davos. Kristalina Georgieva, Managing Director of the International Monetary Fund, will also speak.

Commodities rose as traders looked beyond bearish news this week out of the US and bet on China’s economic revival. JPMorgan Chase & Co. raised its estimate for the nation’s oil demand growth and said it’s reopening sooner and more rapidly than the bank originally expected.

Bitcoin trimmed its advance after cryptocurrency lender Genesis Global Holdco filed for bankruptcy.

Japan’s benchmark 10-year yield fell half a basis point to 0.4% versus the central bank’s 0.5% ceiling, while bond futures rallied. Australian 10-year yields were up eight basis points.

The yen weakened slightly as higher Asian equities damped the currency’s haven appeal. Consumer price data released earlier in the day showed inflation at 4% for the first time in more than four decades, maintaining pressure on the Bank of Japan to tighten policy.

A gauge of dollar strength edged slightly higher on the day and the week.

On Thursday in the US, Federal Reserve Vice Chair Lael Brainard, considered a dove, said rates would need to stay elevated for a period to further cool inflation. She didn’t state a preference for whether the Fed should downshift hikes at its next meeting or what peak rate she envisioned this year.

Her comments came a day after Fed hawks called for boosting rates, with St. Louis Fed President James Bullard penciling in a forecast for a rate range of 5.25% to 5.5% by the end of this year. The current range is 4.25% to 4.5%.

Adding to the somber mood in the US, the federal debt limit was hit and the Treasury Department began the use of special measures to avoid defaulting on any payments.

Data were mixed, with new US home construction declining for a fourth-straight month in December. Applications for US unemployment benefits unexpectedly fell last week, sliding to the lowest level since September and underscoring a strong jobs market. That followed figures a day earlier showing producer prices and retail sales fell, while business equipment production slumped.

Elsewhere in markets, oil headed for a second weekly gain as optimism over stronger Chinese demand overshadowed a weaker outlook in other major economies.

Copper was poised for a fifth weekly increase, its best run since May 2021, with global supply risks persisting and inventories near historic lows.

Key events on Friday:

US existing home sales, Friday
IMF’s Kristalina Georgieva and ECB’s Lagarde speak in Davos, Friday

Here are some of the main market moves:

Stocks

S&P 500 futures rose 0.2% as of 6:45 a.m. London time. The S&P 500 fell 0.8%
Nasdaq 100 futures rose 0.4%. The Nasdaq 100 fell 1%
Hong Kong’s Hang Seng rose 1.4%
Japan’s Topix Index rose 0.6%
The Shanghai Composite rose 0.7%
Euro Stoxx 50 futures rose 0.4%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0829
The Japanese yen fell 0.5% to 129.10 per dollar
The offshore yuan fell 0.1% to 6.7808 per dollar
The British pound fell 0.2% to $1.2372

Cryptocurrencies

Bitcoin rose 0.1% to $20,967.31
Ether was little changed at $1,546.22

Bonds

The yield on 10-year Treasuries advanced two basis points to 3.41%
Japan’s 10-year yield declined half a basis point to 0.4%
Australia’s 10-year yield advanced eight basis points to 3.40%

Commodities

West Texas Intermediate crude rose 0.5% to $80.76 a barrel
Spot gold fell 0.3% to $1,927.10 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Stephen Kirkland and Rob Verdonck.

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