US stock futures pushed lower on Thursday and Treasury yields spiked further after data signaled continued resilience in the labor market, which could keep pressure on the Federal Reserve to stay the course with its rate hikes.
(Bloomberg) — US stock futures pushed lower on Thursday and Treasury yields spiked further after data signaled continued resilience in the labor market, which could keep pressure on the Federal Reserve to stay the course with its rate hikes.
Futures on the S&P 500 and the Nasdaq 100 pushed lower after jobless claims fell for the week. In the US premarket, Silvergate Capital Corp. plunged after the crypto-friendly bank said its weighing the viability of its business and Tesla Inc. retreated after the electric-vehicle maker’s investor day disappointed analysts.
Treasuries extended their declines as data showed labor costs rising. Yields across the curve are now above the 4% level.
The focus now is on how much higher interest rates might go in the US and eurozone, with swaps markets now pricing a peak Fed policy rate of 5.5% in September, and some even betting on 6%. US 10-year yields, the main reference rate for the global cost of capital, rose 40 basis points in February and are consolidating their rise past 4%.
Another batch of data on Thursday also showed euro-area inflation slowed by less than anticipated and underlying price pressures surged to a new record, heaping pressure on the European Central Bank to drive up rates further. ECB interest rates are now seen rising above 4% and German benchmark bond yields traded above 2.7%.
“We have upgraded our terminal Fed forecast to 5.75% which is above what markets are pricing — we do think the US economy is proving highly resilient because of excess savings and a strong labor market,” Thomas Hempell, head of macro and market research at Generali Investments, said in an interview. “Data has poured cold water on the disinflation process and markets are highly alert to anything that alters the inflation outlook.”
That’s damping appetite for risk taking in markets around the world, with some even expressing concern that China’s post-Covid economic recovery could exacerbate global price pressures.
China’s reopening is a much-needed bright spot for investors, but in terms of inflation “adds cyclical upside pressure because of the sheer amount of demand” that it brings, especially in commodities, Charu Chanana, senior markets strategist at Saxo Capital Markets, said on Bloomberg Television.
The hawkish Fed rate bets supported the US dollar against its Group-of-10 counterparts, with the greenback looking set to extend February’s 2.6% gain.
Read more: Dollar Short Misfires in Ominous Signal for World Markets
Oil extended a gain to three days as traders weighed the potential revival in Chinese demand against concerns over tighter US monetary policy.
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.6% as of 8:34 a.m. New York time
- Nasdaq 100 futures fell 1%
- Futures on the Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 rose 0.1%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index rose 0.5%
- The euro fell 0.7% to $1.0589
- The British pound fell 0.8% to $1.1930
- The Japanese yen fell 0.6% to 137.06 per dollar
Cryptocurrencies
- Bitcoin fell 0.9% to $23,357.82
- Ether fell 1.4% to $1,633.68
Bonds
- The yield on 10-year Treasuries advanced eight basis points to 4.08%
- Germany’s 10-year yield advanced two basis points to 2.73%
- Britain’s 10-year yield advanced three basis points to 3.87%
Commodities
- West Texas Intermediate crude rose 0.1% to $77.77 a barrel
- Gold futures fell 0.4% to $1,838.40 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rheaa Rao, Tassia Sipahutar and Brett Miller.
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