Stocks slide with bonds after US yield rises: Markets wrap

(Bloomberg) — Stocks fell and bonds fell, tracking a decline in U.S. Treasuries overnight after weak debt auctions and hawkish comments from the Federal Reserve chairman.

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The European Stoxx 600 index fell 0.6%, and futures pointed to a similar decline on Wall Street. British 10-year bond yields added five basis points, while German bond yields of similar maturity fell from a six-month high after regional inflation readings came in below the monthly estimate of the national figure.

Markets are feeling the repercussions of the difficult US session, after tepid demand for US banknote sales, resilient consumer confidence data and central bank talk fueled expectations that interest rates will remain high. An auction of seven-year Treasury bonds will be held later on Wednesday, and the focus will be on an important edition of US price growth at the end of the week.

“The risk of higher long-term bond yields weighs on equity valuations, and short-term pressure seems to be a given,” said Leonardo Bellandini, equity strategist at Julius Baer. “However, with inflation expectations moderating and interest rate cuts coming soon, we believe markets can continue to move higher.”

After jumping nine basis points on Tuesday, 10-year Treasury yields rose to 4.56%. The Stoxx 600 is on track for a 2.2% gain in May, while the S&P 500 rose 5.4% during the month through Tuesday’s close.

Friday sees the release of the Fed’s preferred measure of inflation – the Personal Consumption Expenditures Index. Economists expect the personal consumption expenditures deflator in April to rise at an annual pace of 2.7%, as was the case in March.

“One possible banana peel is that large negative surprises in inflation could now give rise to a view that the US economy cannot be as strong as previously expected — that is, bad news is bad news,” Jeffrey Yu, Chief Strategist at New York Mellon Bank.

Federal Reserve Chairman Jerome Powell and his colleagues stressed the need for more evidence that inflation is on a sustainable path toward their 2% target before cutting the benchmark interest rate.

The Fed’s Kashkari says higher interest rates are not completely out of the question

Brent crude advanced 0.8% to $84.93 a barrel, as another attack in the Red Sea exacerbated geopolitical tensions in the Middle East ahead of the OPEC+ meeting at the end of the week. West Texas Intermediate crude rose above $80 per barrel.

The story continues

The company’s most prominent features:

• Anglo American Plc said it would not give BHP Group any additional time to commit to its takeover bid, signaling a likely end for now to the world’s largest miner’s $49 billion bid.

• ConocoPhillips is in advanced talks to acquire smaller rival Marathon Oil Corp., which would expand the scope of major deals in the oil industry, the Financial Times reported.

• Royal Mail’s parent company has agreed to a £3.6 billion ($4.6 billion) takeover by Czech billionaire Daniel Kretinski, setting the stage for a political battle over the future ownership of Britain’s postal service.

• Lenovo Group Ltd. plans to sell $2 billion worth of zero-coupon convertible bonds to Saudi Arabia’s sovereign wealth fund, part of a broader strategic agreement with the technology-hungry kingdom.

Main events this week:

• German Consumer Price Index, Wednesday

• Fed Beige Book, Wednesday

• The Fed’s John Williams speaks on Wednesday

• Eurozone economic confidence, unemployment, consumer confidence, Thursday

• US Initial Jobless Claims, GDP, Wholesale Inventories, Thursday

• The Fed’s John Williams and Lori Logan speak on Thursday

• Unemployment in Japan, CPI in Tokyo, industrial production, retail sales, Friday

• China’s official manufacturing and non-manufacturing PMI, Friday

• Eurozone consumer price index, Friday

• US consumer income, spending, personal consumption expenditures deflator, Friday

• The Fed’s Rafael Bostic speaks on Friday

Some key movements in the markets:

Stores

• The Stoxx Europe 600 Index was down 0.6% as of 10:53 AM London time

• S&P 500 futures fell 0.6%

• Nasdaq 100 futures fell 0.7%

• Dow Jones Industrial Average futures fell 0.5%

• MSCI Asia Pacific Stock Index fell 1.4%

• MSCI Emerging Markets Index falls 1.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• There was little change in the euro at $1.0853

• There was little change in the Japanese yen at 157.16 to the dollar

• There was little change in the yuan in external transactions at 7.2688 to the dollar

• There was little change in the pound sterling at $1.2763

Digital currencies

• Bitcoin fell 0.6% to $67,812.88

• Ethereum fell 0.6% to $3,803.86

Bonds

• The yield on 10-year Treasury bonds rose two basis points to 4.57%.

• The yield on 10-year German bonds rose four basis points to 2.63%.

• The UK 10-year bond yield rose 6 basis points to 4.34%.

Goods

• Brent crude rose 0.8 percent to $84.92 a barrel

• Gold in spot transactions fell 0.7 percent to $2,345.68 per ounce

This story was produced with assistance from Bloomberg Automation.

-With assistance from Rob Verdonk, Tasya Sibahutar, Allegra Catelli, and Winnie Hsu.

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