Asian equities, rise in US futures; Treasuries Rise: Market Recap

This content was published on January 20, 2022 – 04:17

(Bloomberg) – U.S. futures and Asian equities rose on Thursday as sentiment received a boost after a pause in global sovereign bond selling and possible moves to ease the sector’s liquidity crunch distressed real estate in China.

The MSCI Inc. index of Asia-Pacific stocks fell five sessions, led by a rise in Hong Kong, where technology stocks rose. US and European futures were in the green. The S&P 500 lost 1% in a choppy session on Wednesday, while the Nasdaq Composite ended in correction territory, down more than 10% from a November high.

Chinese regulators are considering making it easier for builders to access some funds from pre-sold properties, a step that would help address the industry’s cash crunch. Shares of property developers soared. Meanwhile, Chinese lenders again cut borrowing costs to boost economic growth.

Treasury yields slipped but remain higher for the week on concerns about high inflation and the prospect of interest rate hikes from the Federal Reserve. A dollar gauge was little changed, crude oil held on to gains and gold hit a roughly two-month high. The Australian currency rose following a fall in unemployment.

The dominant theme for markets remains the Fed’s future rate hikes and possible reduction in its holdings of Treasuries starting later in 2022. The withdrawal of outsized stimulus threatens to inject more volatility into a range of assets. Global stocks have already fallen more than 3% this year.

“The market now faces uncertainty regarding both rate hikes and the balance sheet,” wrote Steven Englander, global head of G-10 FX research at Standard Chartered Bank, in a note. He added that it is possible that the recent volatility in the bond market will continue in the short term.

Biden on the Fed

Chairman Joe Biden said it was incumbent on the Fed to contain the fastest inflation in decades and backed central bank plans to scale back stimulus.

He also indicated that his $2 trillion economic program will have to be broken and said he was not yet ready to ease tariffs on China. Regarding the tension between Russia and Ukraine, he said he believed Russia would “intervene” on Ukraine, adding that such a step would “severely” harm President Vladimir Putin.

In the US, positive earnings from companies such as Morgan Stanley, UnitedHealth Group Inc. and Procter & Gamble Co. failed to bolster sentiment.

It’s been a bit of a bumpy earnings season so far, and investors should watch corporate commentary on price and wage pressures, RiverFront Investment Group senior market strategist Rebecca Felton told Bloomberg Television.

“We believe stocks can continue to rise even if the Fed changes policy,” she said, adding that corporate earnings are likely to beat estimates.

For more market analysis, read our MLIV blog.

What to watch this week:

  • Netflix is ​​among the companies reporting results during the week
  • US data includes jobless claims on Thursday
  • Interest rate decisions due from countries including Indonesia, Malaysia, Norway, Turkey and Ukraine on Thursday
  • EIA Crude Oil Inventory Report, Thursday

Some of the major movements in the markets:

Shares

  • S&P 500 futures rose 0.5% at 1:08 p.m. in Tokyo. The S&P 500 fell 1%
  • Nasdaq 100 futures rose 0.6%. The Nasdaq 100 fell 1.1%
  • Japan’s Topix index gained 1.1%
  • Australia’s S&P/ASX 200 index rose 0.1%
  • South Korea’s Kospi index climbed 0.6%
  • Hong Kong’s Hang Seng index rose 2.3%
  • China’s Shanghai Composite Index rose 0.3%
  • Euro Stoxx 50 futures rose 0.4%

Currencies

  • The Bloomberg Dollar Spot Index remained stable
  • The euro was at $1.1350
  • The Japanese yen was at 114.40 to the dollar
  • The offshore yuan was at 6.3473 to the dollar

Obligations

  • The yield on 10-year US Treasuries fell one basis point to 1.85%
  • The Australian 10-year bond yield was 2%

Merchandise

  • West Texas Intermediate crude rose 0.1% to $87.03 a barrel
  • Gold was at $1,839.18 an ounce

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Garland K. Long