(Bloomberg) — Stocks kept to narrow ranges before economic data and commentary from Federal Reserve speakers that could offer clues on the outlook for interest rates. Japan’s two-year bond yield climbed to the highest in more than a decade.
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Investors appeared reluctant to make large wagers on equities, with Europe’s Stoxx 600 index hovering near its all-time high, while US equity futures were steady. The S&P 500 slipped for the first time in four days on Monday, retreating from its latest record close. Asian shares were mixed, though Chinese shares were mostly higher, led by tech companies.
Readings on the US economy are in sharp focus this week, with figures on durable goods and house prices due later, before attention turns to an update on GDP growth on Wednesday. Initial jobless claims and the Fed’s favored inflation gauge headline Thursday’s data.
“Favorable data — meaning resilient but not abnormally strong growth, coupled with softening inflation, would allow the market bulls to surf on the Goldilocks wave,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “If that’s the case, we could see the stock market rally continue, and to broaden to sectors other than the technology stocks.”
Japan’s two-year yield climbed to the highest since 2011 after stronger-than-expected inflation data boosted bets the central bank will end its negative-interest-rate policy in coming months. Traders increased the probability of Bank of Japan exiting its negative rate policy by April to about 82%, up from 78% on Monday, according to swaps data compiled by Bloomberg. The yen strengthened versus the dollar.
The inflation “report is adding to speculation that the BOJ will end negative-rate policy as early as March and is serving as a selling catalyst for bonds,” said Kazuya Fujiwara, a fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. The data underscores persistent inflationary pressures, he said.
Asia’s equity benchmark is heading for a monthly gain, driven by a rally in Japanese and Chinese markets. There’s still plenty of uncertainty in markets though over factors such as the path of potential Fed rate cuts, the likelihood for more support measures from China, and whether share valuations are attractive enough to underpin further gains.
“Our sense is that valuations in aggregate are fair,” Sunil Koul, a strategist at Goldman Sachs Group Inc., said on Bloomberg Television. From here, “it’s the underlying profit delivery that is going to drive the market. We are penciling 15% earnings growth for the region this year,” he said.
Read more: BlackRock, Amundi Expect Japanese Stock Rally to Power Ahead
Chinese state-backed funds have poured more than 410 billion yuan ($57 billion) into onshore shares this year in a bid to prop up the market, according to estimates by UBS Group AG. The Swiss bank based its calculations on “excess” transactions of 54 Chinese exchange-traded funds.
Fast-fashion company Shein is considering the possibility of switching its initial public offering to London from New York because of hurdles to the listing in the US, according to people with knowledge of the matter. Shein, which was founded in China, is now headquartered in Singapore.
Read more: Debt-Addicted Companies Seek Equity as Interest Costs Skyrocket
Treasuries edged higher, after sliding Monday amid heavy corporate issuance and two note auctions.
Wall Street is keeping a close eye on how the bond market will manage to absorb heavy Treasury and corporate sales amid month-end positioning. Blue-chip companies in the US have sold a record $172 billion of bonds in February as they race to seize on investor demand amid a drop in borrowing costs.
Elsewhere, Bitcoin climbed, rising briefly beyond $57,000 for the first time since late 2021, supported by investor demand through exchange-traded funds as well as further purchases by MicroStrategy Inc.
In commodities, global benchmark Brent traded above $82 a barrel after rising on Monday, while gold steadied near a two-week high as the market waited for more clues on when the Fed will start cutting interest rates.
Key Events This Week:
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BOE Governor Andrew Bailey speaks, Tuesday
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US Conf. Board consumer confidence, durable goods, Tuesday
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Michigan Republican and Democratic presidential primaries, Tuesday
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Reserve Bank of New Zealand policy decision, Wednesday
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Eurozone economic confidence, consumer confidence, Wednesday
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US wholesale inventories, GDP, Wednesday
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Fed’s Raphael Bostic, Susan Collins and John Williams speak, Wednesday
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G-20 finance ministers and central bank chiefs meet in Sao Paulo, Wednesday through Thursday
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Germany CPI, unemployment, Thursday
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US consumer income, PCE deflator, initial jobless claims, Thursday
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Fed’s Austan Goolsbee, Raphael Bostic and Loretta Mester speak, Thursday
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China official PMI, Caixin manufacturing PMI, Friday
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Eurozone S&P Global Manufacturing PMI, CPI, unemployment, Friday
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BOE chief economist Huw Pill speaks, Friday
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US construction spending, ISM Manufacturing, University of Michigan consumer sentiment, Friday
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Fed’s Raphael Bostic and Mary Daly speak, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 was little changed as of 8:21 a.m. London time
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S&P 500 futures were little changed
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Nasdaq 100 futures were unchanged
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Futures on the Dow Jones Industrial Average were little changed
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The MSCI Asia Pacific Index rose 0.3%
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The MSCI Emerging Markets Index rose 0.1%
Currencies
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The Bloomberg Dollar Spot Index fell 0.1%
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The euro was little changed at $1.0857
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The Japanese yen rose 0.3% to 150.27 per dollar
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The offshore yuan was little changed at 7.2111 per dollar
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The British pound was little changed at $1.2692
Cryptocurrencies
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Bitcoin rose 3.1% to $56,370.08
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Ether rose 1.5% to $3,232.62
Bonds
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The yield on 10-year Treasuries declined two basis points to 4.26%
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Germany’s 10-year yield declined two basis points to 2.42%
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Britain’s 10-year yield declined five basis points to 4.11%
Commodities
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Brent crude rose 0.3% to $82.80 a barrel
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Spot gold rose 0.2% to $2,036.19 an ounce
This story was produced with the assistance of Bloomberg Automation.
—With assistance from Jason Scott and Richard Henderson.
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