US Treasuries rise as traders tempered their expectations for monetary-policy tightening after New Zealand’s measured approach to rate hikes. Oil prices climbed as producers and major consuming nations headed for a confrontation.
Signals from the stock market were mixed, with the European benchmark opening higher while US index futures fell modestly. Energy stocks were among the best performers in the Stoxx 600 gauge. Commodities from iron ore to natural gas advanced, deepening inflation concerns. Treasury yields across two-year to 30-year tenors shed two basis points each.
Investors are on the edge as they face a wall of worry from a resurgence of Covid-19 in Europe to signs of persistent consumer-price growth. Damping inflation is now center-stage for policy makers, with ultra-loose, pandemic-era stimulus set to be wound down. Key US data and Federal Reserve minutes due today may provide the next
catalysts for market moves.
One key topic for the minutes would be “discussions around the criteria for a quicker taper of asset purchases,” Carol Kong, a strategist at Commonwealth Bank of Australia, wrote in a note. Inflation trends suggest the Fed needs to start tightening sooner that presently signalled, Kong added.
New Zealand’s currency sinks after the nation raised interest rates to 0.75% to curb price pressures, a smaller move than some had expected. The central bank projected 2% benchmark borrowing costs by the end of 2022.
Oil futures in New York rose following an announcement by the US and other nations of a coordinated release of strategic reserves. Focus now turns to Opec+ on how the group will respond to the moves. The alliance has already said that such releases were unjustified by market conditions and it may reconsider plans to add more supply at a meeting next week.
The Treasury yield curve continued to flatten. The spread between the 30-year and two-year rates traded near the lowest in a year. Europe’s Stoxx 600 rises for the first time in five days, aided by dip buyers. MSCI Inc’s Asia-Pacific share gauge falls for a third day, sapped by Japan.
The Stoxx Europe 600 rises 0.4% as of 8:38 am London time and futures on the S&P 500 were little changed.
While futures on the Nasdaq 100 were little changed, futures on the Dow Jones Industrial Average were little changed and the MSCI Asia Pacific Index falls 0.4%. The MSCI Emerging Markets Index was little changed.
While the Bloomberg Dollar Spot Index was little changed, the euro was little changed at $1.1238 and the Japanese yen rose 0.2% to 114.96 per dollar. The offshore yuan was little changed at 6.3891 per dollar and the British pound was also little changed at $1.3380.
The yield on 10-year Treasuries declined two basis points to 1.64% and Germany’s 10-year yield declined one basis point to -0.23%. Britain’s 10-year yield was little changed at 0.99%.
While Brent crude rises 0.3% to $82.57 a barrel, spot gold rises 0.2% to $1,792.13 an ounce.