US, Europe Futures Climb as Asia Stocks Fluctuate:
- The 10-year Treasury holds gains after strong auction result
- Fed officials reiterate higher-for-longer interest rates call
US and European stock futures edged higher while equity benchmarks across Asia fluctuated. Chinese shares climbed after opening lower, Japanese benchmarks traded in and out of positive territory and Australian stocks fell.
The mixed sentiment followed a down day on Wall Street Wednesday when hawkish comments from Federal Reserve officials prompted investors to rethink expectations about US peak rates. The S&P 500 fell 1.1% and the tech-heavy Nasdaq 100 dropped 1.8%.
Treasury 10-year notes held the gains from a rally on Wednesday in the wake of a strong auction. The Australian and New Zealand dollar advanced.
The knock-to-risk sentiment hinged on comments from four Fed officials who spoke at separate events Wednesday and reinforced a shared message: the fight against inflation is not yet won. Fed-funds futures markets priced in higher rates, with some options traders betting the US policy benchmark will reach 6%.
“I don’t think the Fed will cut within this year,” Jun Bei Liu, portfolio manager at Tribeca Investment Partners, said on Bloomberg Television. “The Fed was behind the curve in terms of putting up their interest rate and they certainly are going to be very slow in cutting the interest rate.”
Fed Bank of New York President John Williams said prior Fed indications that would see rates rise to 5.1% remain accurate.
An index of the dollar weakened. The yen strengthened following speculation that Japan’s ruling party members would face division if Prime Minister Fumio Kishida’s choice for the new Bank of Japan chief is someone who is unlikely to follow the current path of monetary easing.
A 7.7% drop for Alphabet Inc. shares amplified the hit to tech stocks as investors showed concern that its new artificial intelligence chatbot Bard may yield inaccurate responses. Walt Disney Co. shares surged in after-hours trading following fourth-quarter earnings that outpaced estimates. The company unveiled a dramatic restructuring that includes slashing 7,000 jobs as part of a $5.5 billion cost-cutting plan.
“We continue to expect market volatility ahead as news flow on earnings, inflation, the economy, and Fed bounces from bullish to bearish and back again,” wrote Stephen Auth, chief investment officer of equities at Federated Hermes.
Shares in Adani Enterprises fell as much as 10% to snap a two-day rally after MSCI Inc. said it was reviewing the amount of Adani Group-linked shares that were freely tradable in public markets.
Meanwhile, Turkey’s stock exchange suspended trading for the first time in 24 years following a selloff that erased billions of dollars from the value of its main equities gauge in the wake of two devastating earthquakes. Trading in Turkish equities, futures and option contracts will resume on Feb. 15.
Elsewhere, oil steadied during trading in Asia after rallying about 7% over the previous three sessions as investors assessed the latest commentary from Fed officials and mixed Energy Information Administration data. Gold was little changed.
Source: Bloomberg.com