Asian Stocks Set to Rise; Bond Yields Hit 2024 Highs: Market Roundup

(Bloomberg) - Asian stocks are set to rise Tuesday morning after U.S. benchmarks traded lower and Treasuries got off to an unfavorable start to the week ahead of key inflation data.

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Equity futures advanced in Tokyo, Hong Kong and Sydney. U.S. 10-year Treasury yields rose to the highest since November, approaching the psychologically important 4.5% level. Traders' confidence in the Fed's three quarter-point rate cuts this year is fading fast, with the market now leaning toward just two.

Economists surveyed by Bloomberg predicted Wednesday's consumer price index will show inflationary pressures easing. However, the core index, which excludes food and energy costs, will rise 3.7% from a year ago, above the Fed's target of 2%.

"After Monday's eclipse, U.S. core inflation will determine whether the market's fear of a June rate cut widens or disappears," said Morgan Stanley strategist Matthew Hornbach and others.

The U.S. 10-year Treasury yield rose two basis points to 4.42% after hitting 4.46%. Australia's 10-year yield was little changed after rising 10 basis points on Monday. The S&P 500 hovered near 5,200, with futures pointing to a modest gain on Tuesday. Bitcoin topped $71,000.

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This week's inflation data could have a big impact on Morgan Stanley E*Trade's resonance Chris Larkin as some Fed members question the wisdom of cutting rates if inflation remains in a "sticky" holding pattern.

"While the Fed has been hesitant to report higher-than-expected inflation data for several months in a row, a third month of data could change their minds," he said.

To Michael Feroli (Michael Feroli) led by JPMorgan Chase (JPMorgan Chase & Co.) They now expect the U.S. central bank will begin to ease monetary policy in July rather than June.

"While investors seem to be anxiously awaiting accommodative monetary policy, the current environment doesn't quite scream 'rate cut!'" said Jason Pride of Glenmede." With a strong labor market, expanding manufacturing sector and climbing commodity prices, the Fed may not be in a hurry to cut rates."

According to Bloomberg pricing, the swap carry implies that the U.S. will adopt an accommodative monetary policy of about 60 basis points this year, which implies that the most likely outcome will be two rate cuts, with the first expected by September. On Friday, the likelihood of a third rate cut remained above 50%.

JPMorgan strategists led by Mislav Matejka believe that the rise in bond yields could be driven by the "wrong reasons", which would weigh on the stock market.

The team expects U.S. 10-year Treasury yields to fall amid rising geopolitical risks, while noting the risk of overheated inflation. Strategists wrote that stocks with high funding costs could remain under pressure as inflation could overshoot.

Wall Street expects the first quarter of the stock market as hot as possible, but the U.S. corporate earnings season will remain subdued. According to Bloomberg Intelligence (Bloomberg Intelligence) compiled data, strategists expect the S&P 500 companies in the first quarter of the year-on-year profit growth will be the smallest since 2019, only 3.9%.

"The recent tautness of inflation reduces the immediacy of rate cuts, which puts more pressure on earnings to drive the market higher going forward," said Richard Saperstein of Treasury Partners." With rising market multiples and rising bond yields, we remain cautious on the stock market until the earnings season provides clear evidence of earnings growth."

Main events of the week

• China's Total Asset Financing Volume, Currency Supply, New RMB Loans, Tuesday

• On Wednesday, Japan's PPI

• On Wednesday, the Canadian interest rate resolution

• Wednesday, U.S. CPI, Fed Meeting Minutes

• On Wednesday, Chicago Fed matron Austan Goolsbee spoke.

• On Thursday, China's PPI, CPI

• On Thursday, the eurozone ECB interest rate resolution

• Thursday: US Initial Jobless Claims, PPI

• On Thursday, New York Fed matron John Williams spoke.

• On Thursday, Boston Fed matron Susan Collins spoke.

• On Friday, China Trade

• On Friday, the University of Michigan Consumer Confidence Index

• On Friday, Citigroup, JPMorgan Chase and Wells Fargo will announce industry results.

• On Friday, San Francisco Fed matron Mary Daly spoke.

Main Market Movements

stock (market)

• As of 8:31 a.m. Tokyo time, the Hang Seng Index futures rose 0.3 percent.

• Nikkei 225 futures rose 0.2%.

• S&P 500 futures up 0.1%. S&P 500 little changed

• S&P/ASX 200 futures rose 0.5 percent.

Currency

• Bloomberg Dollar Spot Index little changed

• AUD little changed at $0.6606

Encryption Currency

• Bitcoin rises 0.1% to $71,798.48

• Ether rises 0.6% to $3,711.6

debentures

• The yield on the 10-year bond rose two basis points to 4.42 percent.

• Australia's 10-year bond yield was little changed at 4.19%.

bulk commodities

• West Texas Kerosene Intermediate crude up 0.31 TP3T to $86.67 per barrel

• Not much change in spot gold

This story was produced with the assistance of Bloomberg Automation.

-Rita Nazareth assisted with the writing.

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