Market Wrap: 19 April 2023

Market Wrap: 19 April 2023

Stocks Slip, Bond Yields Rise With Prices in Focus: 

  • UK print shows price pressures ahead of euro-area CPI release
  • Two Fed officials reaffirm view more rate hikes are needed

Stocks in Europe retreated along with US equity futures, while bond yields rose as yet another a hot inflation print in the the UK brought price pressures back in focus ahead of data for the euro region.

The Stoxx Europe 600 index slipped 0.2% at the open, with the technology sector leading the decline. ASML Holding NV dropped more than 3% after the Dutch chip maker after reporting results that raised concerns about the demand outlook. Contracts on the rates-sensitive Nasdaq 100 fell about 0.5%, while those on the S&P 500 were down 0.3% ahead of the next swathe of US bank earnings reports.

Treasury two-year yields, which are more reactive to imminent policy moves than longer maturities, climbed 5 basis points to 4.24%, while the yield on 10-year bonds rose 4 basis points. The UK two-year yield jumped 12 basis points and the pound strengthened after data showed UK inflation beat estimates in March as prices rose by 10.1% on a yearly basis.

Traders will be monitoring inflation data from the euro area that will determine European Central Bank’s monetary policy path going forward. ECB Chief Economist Philip Lane said Tuesday another increase in interest rates would be appropriate in May, but a more detailed picture of inflation would be needed.

“Two more hikes from here, getting to 3.5%, that will get the ECB to a stance that we think would be close to where it needs to be given the current circumstances,” Wouter Sturkenboom, chief investment strategist for EMEA & Asia Pacific at Northern Trust Asset Management, said on Bloomberg Television.

MSCI Inc.’s Asia Pacific Index declined 0.4%, while the Hang Seng China Enterprises Index slid as much as 1.5% before paring losses. Futures on the S&P 500, along with those on the Nasdaq 100 and Euro Stoxx 50 all declined.

Over the US, Bank of Atlanta President Raphael Bostic told CNBC he favors raising interest rates one more time and then holding them above 5% for some time to curb inflation. His St. Louis counterpart James Bullard told Reuters he favors getting rates into a 5.5%-to-5.75% range. The benchmark currently sits between 4.75% and 5%.

Swaps are pricing in a quarter-point hike by the Fed in May, with rate cuts starting to take place in July. 

“That might be too early,” Jonathan Liang, head of investment specialists for Asia ex-Japan at JPMorgan Asset Management, said on Bloomberg Television. “There could be a pivot, maybe towards the end of this year, but not maybe as soon as what the market is currently pricing.” 


Despite the hawkish comments by the Fed officials, the Cboe Volatility Index stayed at the lowest since January 2022, remaining below 17. Bank of America’s GFSI Market Risk Index — a gauge of global volatility across assets — held near the lowest since February 2022.

Japan’s Sumitomo Mitsui Financial Group Inc. sold yen-denominated Additional Tier 1 bonds, becoming the first major global bank to issue such debt since the collapse of Credit Suisse Group AG last month.

Elsewhere in markets, Bitcoin held slightly above the closely watched $30,000 level. Oil steadied as investors weighed signs of shrinking US crude stockpiles against concerns over an uneven demand recovery. 

Gold dipped and iron ore declined after Chinese authorities vowed to curb “unreasonable” price gains in their latest move to crack down on market speculation.



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