(Bloomberg) — Asian stocks follow Wall Street stocks as the latest evidence of stubborn U.S. inflation strengthens the view that the Federal Reserve is in no hurry to cut interest rates. He was ready.
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Futures showed benchmark markets in Japan, Hong Kong and Australia will open after the S&P 500 index erased earlier gains and fell more than 1% in choppy trading. The decline was led by interest rate-sensitive tech giants Microsoft, Apple and Nvidia. Bond yields soared on strong retail sales data, while oil soared on geopolitical unrest.
The premium for one-month put options, which protect against a decline in U.S. stocks, rose to the highest level since October, increasing volatility. The VIX, Wall Street's “fear index,” has reached unprecedented levels this year. The S&P 500 index fell below 5,100, its lowest level in about two months. The tech-heavy Nasdaq 100 fell more than 1.5%. Both metrics topped his 50-day moving average. This was considered a bearish signal by some chartists. Banks outperformed with Goldman Sachs Group Inc.'s surprise profit.
“Stocks have broken the uptrend and are starting to fall back,'' Piper Sandler's Craig Johnson said. “We expect interest rates to remain high for an extended period of time. A more cautious and tactical approach is favored as earnings season begins.”
The 10-year Treasury yield rose 9 basis points to 4.62%, while the 2-year yield approached 5%. The entry of JPMorgan Chase & Co. and Wells Fargo & Co. into the U.S. high-grade bond market has also put pressure on bond prices, making them the first stocks likely to see a surge of bond selling by banks after the earnings call.
West Texas Intermediate briefly fell below that level, but regained the $85 level on Monday and inched higher in Asia early Tuesday. Gold prices continued to rise on concerns about escalating tensions in the Middle East. Israeli military officials reiterated that Israel had no choice but to respond to the weekend's attack on Iran.
U.S. retail sales rose more than expected in March and was revised upward for the previous month, demonstrating the resilience of consumer demand that continues to drive a surprisingly strong economy. As long as a strong labor market supports household demand, there is a risk that inflation will become entrenched.
“To avoid the S&P 500's first three-week decline since September of last year, investors should not delay rate cuts due to weak inflation,” said Chris Larkin of Morgan Stanley's E-Trade. We need to overcome concerns that this is the case.” “In the short term, the first full week of earnings season could set the tone, but geopolitical tensions in the Middle East remain a wild card.”
In Asia, China took a cautious stance on monetary easing as it withdrew cash from its banking system for the second straight month, putting pressure on its currency to depreciate. The country's authorities face increasingly difficult challenges in managing economic risks and addressing policy differences with the United States.
Torsten Slok of Apollo Global Management said strong U.S. tailwinds from accommodative financial conditions continue to lift inflation and growth, including consumer spending in March, and the Fed is unlikely to cut interest rates in 2024. I continue to take this view.
“The market has been buoyed by the magic of strong corporate earnings and lower interest rates, but the two appear increasingly at odds, so there is some potential for short-term uncertainty,” said Chris Zaccarelli of Independent Advisors. We will be cautious.” Alliance.
Monetary policy expectations have shifted toward a delay in the Fed's start to cut rates, with officials saying they need greater confidence that inflation is on a sustainable path toward the 2% goal. Says. Traders are no longer fully pricing in rate cuts before November.
“Our view is that the Fed's interest rate system is not about “longer-term increases,'' but rather “an immediate pause until inflation loses its tenacity.'' 'This is a continuation of '.
Company highlights:
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Slowing demand for electric vehicles has forced Tesla to cut its global workforce by more than 10%, with two of Tesla's top executives leaving the company amid the biggest layoffs in the automaker's history.
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Lockheed Martin Corp. has beaten rival Northrop Grumman Corp. in a $17 billion race to develop and ultimately continue production of America's next-generation anti-missile warhead, two people familiar with the decision said. Ta.
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M&T Bank raised its 2024 outlook for net interest income, its main source of revenue.
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American Airlines Group's pilots union has warned its members to be vigilant due to a “significant uptick” in safety and maintenance-related issues at the airline.
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Clearlake Capital Group LP has made a sweet bid of $80 a share to acquire Blackbaud Inc., about a year after its previous approach was rejected by the cloud software provider.
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Charles Schwab's first-quarter net revenue beat expectations as the retail brokerage looks to weather the turmoil of 2023.
This week's main events:
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China real estate prices, retail sales, industrial production, GDP, Tuesday
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German ZEW survey forecast, Tuesday
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US housing starts, industrial production, Tuesday
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Tuesday's results for Morgan Stanley and Bank of America.
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Fed Vice Chairman Philip Jefferson speaks on Tuesday
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BOE Governor Andrew Bailey speaks on Tuesday
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IMF releases latest global economic outlook on Tuesday
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Eurozone CPI, Wednesday
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Fed issues beige book on Wednesday
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Cleveland Fed President Loretta Mester speaks Wednesday
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Federal Reserve President Michelle Bowman speaks on Wednesday
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BOE Governor Andrew Bailey speaks on Wednesday
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Taiwan Semiconductor's financial results, Thursday
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US conference board leading index, number of existing homes sold, number of new unemployment insurance claims, Thursday
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Fed Director Michelle Bowman speaks Thursday
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New York Fed President John Williams speaks Thursday
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Atlanta Fed President Rafael Bostic speaks Thursday
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BOE Deputy Governor Dave Lumsden and ECB Board Member Joachim Nagel speak on Friday
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Chicago Fed President Austan Goolsby speaks on Friday
The main movements in the market are:
stock
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As of 4 p.m. New York time, the S&P 500 was down 1.2%.
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Nasdaq 100 fell 1.7%
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Hang Seng futures were down 1% as of 7:07 a.m. Tokyo time.
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S&P/ASX 200 futures down 0.8%
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Nikkei 225 futures fell 1.4%
currency
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Bloomberg Dollar Spot Index rose 0.2%
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The euro remains almost unchanged at $1.0625.
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The British pound was almost unchanged at $1.2447.
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The Japanese yen remained almost unchanged at 154.24 yen to the dollar.
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The offshore yuan was almost unchanged at 7.2591 yuan to the dollar.
cryptocurrency
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Bitcoin fell 0.1% to $63,066.89.
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Ether rose 0.5% to $3,098.40
bond
merchandise
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Spot gold rose 0.2% to $2,389.09 an ounce.
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West Texas Intermediate crude rose 0.3% to $85.66 per barrel.
This article was produced in partnership with Bloomberg Automation.
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