US futures and stocks were steady on Thursday, while Treasury yields held the sharp move up from the previous session.
(Bloomberg) — US futures and stocks were steady on Thursday, while Treasury yields held the sharp move up from the previous session.
Concern that central banks will keep driving interest rates higher sent tech stocks in Europe to one of the worst performances among industries, with ASML Holding NV as the biggest drag on the Stoxx 600. In US premarket trading, GameStop Corp. plunged 18% after firing its chief executive and reporting sales that fell short of estimates. Nasdaq 100 futures were little changed after the index yesterday posted its worst decline since April.
Technology stocks, which tend to be the most rate sensitive of all equities, are feeling the pinch as investors consider the possibility that the Federal Reserve isn’t finished with its own tightening. Two major central banks this week — the Bank of Canada and the Reserve Bank of Australia — unexpectedly raised rates to bring inflation under control.
“The key thing to remember is that the fight against inflation isn’t over,” Helen Jewell, EMEA deputy CIO of BlackRock Fundamental Equities, said in an interview with Bloomberg Television. “We’re seeing the stickiness in inflation and concerns coming through from a rate hike perspective.”
Elsewhere in markets, trading was subdued. Treasury yields were steady after the 10-year rate jumped 14 basis points on Wednesday. The dollar weakened against peers.
Read More: Bonds Everywhere Are Suffering as Rate-Hike Fears Swamp Traders
Megacap tech companies had powered the S&P 500 to the brink of a bull market, before rate worries prompted Wednesday’s pullback. Policy decisions are due from the Fed and the ECB next week, with the Fed signaling it may pause rate hikes in June before resuming them later.
The US Big Tech Bull Case Is Starting to Show Signs of Fatigue
The big question facing markets right now is whether the Fed decides to raise rates next Wednesday or holds after 10 straight increases, Deutsche Bank AG strategists including Jim Reid wrote in a note. Traders have boosted wagers on Fed rate increases, with swaps close to pricing in a quarter-point hike for the July meeting.
Yields on two-year US Treasuries are hovering near 4.5%, the highest since March, although well below the 5.07% seen before banking turmoil gripped markets back then.
“While we still expect the Fed to skip the June meeting, this week’s policy decision which expressed more concern over persistent inflation risks makes us more wary,” said Lee Hardman, a strategist at MUFG Bank. “The hawkish policy updates from the RBA and BOC have injected fresh upward momentum into global yields.”
In currency markets, however, not even the shock rate decisions were enough to shake the low-volatility trend that has dominated this year, with options traders sticking to their guns.
Elsewhere, Asian shares ticked lower, while the yen strengthened after data showing Japan’s economy grew faster than expected in the first quarter.
Key events this week:
- US wholesale inventories, initial jobless claims, Thursday
- China PPI, CPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 6:36 a.m. New York time
- Nasdaq 100 futures rose 0.1%
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 was little changed
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.3% to $1.0733
- The British pound rose 0.2% to $1.2466
- The Japanese yen rose 0.3% to 139.71 per dollar
Cryptocurrencies
- Bitcoin rose 0.1% to $26,399.32
- Ether fell 0.1% to $1,839.48
Bonds
- The yield on 10-year Treasuries was little changed at 3.80%
- Germany’s 10-year yield was little changed at 2.46%
- Britain’s 10-year yield advanced three basis points to 4.29%
Commodities
- West Texas Intermediate crude rose 0.9% to $73.20 a barrel
- Gold futures rose 0.1% to $1,960.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Stephen Kirkland, Allegra Catelli and Eva Szalay.
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