US equity futures retreated along with European stocks and bond yields rose as traders assessed the latest corporate earnings reports against the backdrop of yet another hot inflation print from one of the world’s major economies.
(Bloomberg) — US equity futures retreated along with European stocks and bond yields rose as traders assessed the latest corporate earnings reports against the backdrop of yet another hot inflation print from one of the world’s major economies.
Contracts on the rates-sensitive Nasdaq 100 fell about 0.8%, while those on the S&P 500 were down 0.6%. Morgan Stanley declined in premarket trading after mixed results. Among regional banks dented by last month’s tumult, U.S. Bancorp advanced after reporting a rise in deposits, while Citizens Financial Group Inc. dropped after it cut its full-year guidance. Tesla Inc. slipped after the electric-vehicle maker cut prices on some models ahead of first-quarter results due later Wednesday.
Amid continuing hawkish talk from policy makers, investors are monitoring earnings reports for signs of how central banks’ efforts to stifle inflation are affecting economic activity. Interest-rate traders are pricing in one more increase from the Federal Reserve next month. Treasury yields rose and a gauge of the dollar gained.
“Portfolio managers are trying to reduce risk because of concerns that nothing good can happen after so much central bank tightening,” said Andrew Pease, head of investment strategy at Russell investments Ltd. On earnings, “companies are losing pricing power and a margin squeeze is happening in the background and that’s what to look for when the dust settles on quarter one,” he said.
The Stoxx Europe 600 index slipped about 0.3%, with the technology sector leading the decline. ASML Holding NV dropped as much as 4.8% after the Dutch chip maker’s earnings report raised concerns about its demand outlook.
The UK two-year yield jumped as much as 15 basis points and the country’s stock benchmark underperformed after data showed inflation beat estimates in March, prompting traders to ramp up bets on further Bank of England interest-rate hikes.
European Central Bank Chief Economist Philip Lane said Tuesday that another increase in interest rates would be appropriate in May. In the US, Bank of Atlanta President Raphael Bostic told CNBC he favors raising interest rates one more time and then holding them above 5% for some time to curb inflation. His St. Louis counterpart James Bullard said he favors getting rates into a 5.5%-to-5.75% range, according to Reuters.
The benchmark currently sits between 4.75% and 5%. Swaps are pricing in a quarter-point hike by the Fed in May, with rate cuts starting to take place in July.
“That might be too early,” Jonathan Liang, head of investment specialists for Asia ex-Japan at JPMorgan Asset Management, said on Bloomberg Television. “There could be a pivot, maybe towards the end of this year, but not maybe as soon as what the market is currently pricing.”
Elsewhere in markets, Bitcoin fell below the closely watched $30,000 level. Oil declined as investors weighed signs of shrinking US crude stockpiles against concerns over an uneven demand recovery.
Gold dipped and iron ore declined after Chinese authorities vowed to curb “unreasonable” price gains in their latest move to crack down on market speculation.
Key events this week:
- Fed releases Beige Book, Wednesday
- Fed’s John Williams gives a speech, Wednesday
- Fed’s Austan Goolsbee is interviewed on NPR, Wednesday
- China loan prime rates, Thursday
- Eurozone consumer confidence, Thursday
- US initial jobless claims, existing home sales, index of leading economic indicators, Thursday
- ECB issues report on March policy meeting, Thursday
- Fed’s Christopher Waller speaks at cryptocurrency-focused event, Thursday
- Fed’s Patrick Harker speaks on “monetary policy and housing”, Thursday
- Fed’s Loretta Mester discusses the economic and policy outlook, Thursday
- Fed’s Raphael Bostic discusses regional and national economic conditions, Thursday
- Fed’s Michelle Bowman and Lorie Logan speak at event, Thursday
- PMIs for Eurozone, Friday
- Japan CPI, Friday
- Fed’s Lisa Cook discusses economic research at an event, Friday
Some of the main moves in the market:
Stocks
- S&P 500 futures fell 0.6% as of 8:17 a.m. New York time
- Nasdaq 100 futures fell 0.8%
- Futures on the Dow Jones Industrial Average fell 0.4%
- The Stoxx Europe 600 fell 0.3%
- The MSCI World index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.3%
- The euro fell 0.3% to $1.0937
- The British pound was little changed at $1.2415
- The Japanese yen fell 0.4% to 134.67 per dollar
Cryptocurrencies
- Bitcoin fell 3.9% to $29,243.95
- Ether fell 5.6% to $1,975.72
Bonds
- The yield on 10-year Treasuries advanced five basis points to 3.63%
- Germany’s 10-year yield advanced three basis points to 2.51%
- Britain’s 10-year yield advanced 11 basis points to 3.85%
Commodities
- West Texas Intermediate crude fell 2.2% to $79.10 a barrel
- Gold futures fell 1.8% to $1,982.50 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sujata Rao and Sagarika Jaisinghani.
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