Asian Openers Mixed; Treasuries Fall on Powell Speech: Market Roundup

(Bloomberg) - Jerome Powell's hawkish comments helped push the Standard & Poor's 500 Index (S&P 500) down for a third consecutive session, causing two-year Treasury yields to briefly hit 5%, and Asian stocks to open mixed.

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Benchmark futures in Australia and Hong Kong showed losses, while benchmarks in Japan advanced. U.S. yields climbed to a new 2024 high as the Federal Reserve chief said it may take longer to feel confident about inflation - adding that it was appropriate to give restrictive policies time to work. The U.S. dollar posted its best five-day gain since October 2022, while the slide in U.S. stocks from record levels deepened.

Powell's remarks signaled a shift in his message after a key measure of inflation beat expectations for the third straight month. He also indicated that the U.S. central bank may leave interest rates unchanged for longer than originally planned, according to Jeffrey Roach of LPL Financial.

"Powell's comments suggest that the Fed is now looking beyond June," Evercore's Krishna Guha said." His remarks are consistent with 'Plan B' of two rate cuts this July, but validates the possibility that continued disappointing inflation could lead to a longer period of rate hold."

S&P 500 futures showed the index rebounding slightly after falling to around 5,050 on Tuesday. The U.S. 10-year Treasury yield rose 7 basis points to 4.67%, while Australia's 10-year yield rose 4 basis points earlier Wednesday. Gold held near record highs and crude oil was little changed as traders watched Israel's reaction to Iran's unprecedented attack over the weekend.

At the start of the year, traders were expecting six rate cuts, or 1.5 percentage points of easing, by 2024, but now they're wondering if there will even be a half-point cut. Market expectations of a Fed rate cut fell further after Powell's comments on inflation - which have collapsed over the past two weeks. There is still about 40 basis points of easing to be done this year.

"If you were looking for easing or dovish talk from Powell, you didn't miss it - he didn't give it," said Andrew Brenner of NatAlliance Securities.

Earlier Tuesday, Federal Reserve Deputy Simmons Philip Jefferson said he expects inflation to continue to moderate where interest rates are at a precarious level, but that ongoing price pressures will keep borrowing costs high for a longer period of time. Thomas Barkin, the chief executive of the Richmond Fed, said that some recent data, including the consumer price index, did not "support" a soft landing for the economy.

Amid the anxiety, the widely watched MOVE index, an options-based measure of expected Treasury volatility, surged to its highest point since January.

To James Demmert of Main Street Research, the rise in bond yields is a sign that the global economy and corporate profits are strong and resilient. While this may lead to fewer rate cuts than expected, or even none in the foreseeable future, it won't wipe out the equity bull market, he says.

"In the early part of the new business cycle, it's earnings, not the Fed, that's driving the stock market," he said. Earnings have been much better than expected, and we expect similar results as earnings season gets into full swing again," he said. We are buyers of this stock market correction.

Important events this week

• On Wednesday, the Eurozone CPI

• Fed Releases Beige Report, Wednesday

• On Wednesday, resonant Cleveland Fed matron Loretta Mester spoke

• Fed Governor Michelle Bowman Speaks Wednesday

• On Wednesday, Bank of England Governor Andrew Bailey spoke

• On Thursday, Taiwan's semiconductor financial report

• Conf. US Federal Reserve Leading Index, Pending Home Sales, Initial Jobless Claims, Thursday

• Fed Governor Michelle Bowman Speaks Thursday

• New York Fed matron John Williams speaks Thursday

• On Thursday, Atlanta Fed matron Rafael Bostic resonance speech

• Dave Ramsden, Deputy Governor of the Bank of England, and Joachim Nagel, member of the ECB's Günther Committee, spoke on Friday.

• Chicago Fed matron Austan Goolsbee to speak on Friday

Main Market Movements

stock (market)

• As of 8:14 a.m. Tokyo time, Hang Seng Index futures were down 0.2 percent.

• S&P/ASX 200 futures down 0.3 percent

• Nikkei 225 futures rose 0.3%.

• S&P 500 futures up 0.1%. S&P 500 down 0.2

• Nasdaq Resonance 100 Index futures rose 0.1%. Nasdaq Resonance 100 Index was little changed.

Currency

• Bloomberg Dollar Spot Index little changed

• AUD little changed at $0.6407

Encryption Currency

• Bitcoin up 1.2% to $63,815.07

• Ether rises 0.8% to $3,095.13

debentures

• The yield on the 10-year Treasury note rose 7 basis points to 4.67 percent.

• Australia's 10-year bond yield rose 4 basis points to 4.37 percent.

bulk commodities

• West Texas resonance intermediate crude fell 0.11 TP3T to $85.26 per barrel

• Spot gold rose 0.1% to $2,384.65 per ounce

This story was produced with the assistance of Bloomberg Automation.

-Rita Nazareth assisted with the writing.

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