US Stock Futures Drop as High Yields Sour Mood: Markets Wrap

(Bloomberg) — US stock futures extended declines as Treasury yields near the highest level this year fanned concern about restrictive monetary policy.

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Contracts for US equities pointed to a second day of declines on Wall Street, while Europe’s Stoxx 600 was little changed at the open. The MSCI Asia Pacific Index slumped to a three-week low, led weaker by South Korea and Japan. The 10-year Treasury yield hovered around 4.60% after a 15 basis-point jump in the past two days, while a gauge of dollar strength edged higher for a third session.

Global equities are headed for their worst week since mid-April amid a dawning realization that rate cuts in the US aren’t likely anytime soon with inflation still sticky. Another weak US auction result on Wednesday heightened worries that funding the US deficit will drive up yields at a time when the Fed is in no rush ease policy.

Data this week could prove key as investors refine their monetary policy outlook: The US posts gross domestic product numbers later Thursday, with inflation reports from the US and Europe due Friday.

“The market has fallen under the spell of the bond market genie and higher yields,” said Tony Sycamore, market analyst with IG Australia Pty Ltd. “The focus has turned to managing downside risks should we see firmer-than-expected US or European inflation data tomorrow.”

Elsewhere, the rand extended losses as South Africa’s election vote count gathers pace. China’s onshore yuan was little changed after falling to the lowest level since November on Wednesday.

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In commodities, Brent crude fell 0.3% to $83.32 a barrel as traders look to US stockpile data and an OPEC+ meeting on the weekend for more clarity on the supply and demand outlook.

Corporate Highlights:

• China is poised to impose a record fine on PricewaterhouseCoopers LLP and suspend some of the global auditor’s local operations over its role in one of the nation’s biggest alleged financial fraud cases, according to people familiar with the matter.

• Golden Goose is launching a primary offering of €100 million ($108 million) in an initial public offering in Milan as the Italian luxury sneaker brand aims to strengthen its capital structure and reduce debt.

• Saudi Arabia is preparing to formally launch a secondary offering of shares in oil giant Aramco as soon as Sunday, a deal that could raise more than $10 billion and rank among the largest of its kind in recent years.

• Brookfield is in exclusive talks to acquire a majority stake in Neoen SA in a deal valuing the French renewable energy developer at about €6.1 billion.

Key events this week:

• Eurozone economic confidence, unemployment, consumer confidence, Thursday

• US initial jobless claims, GDP, Thursday

• Fed’s John Williams and Lorie Logan speak, Thursday

• Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday

• China official manufacturing and non-manufacturing PMI, Friday

• Eurozone CPI, Friday

• US consumer income, spending, PCE deflator, Friday

• Fed’s Raphael Bostic speak, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 was little changed as of 8:19 a.m. London time

• S&P 500 futures fell 0.6%

• Nasdaq 100 futures fell 0.7%

• Futures on the Dow Jones Industrial Average fell 0.9%

• The MSCI Asia Pacific Index fell 0.9%

• The MSCI Emerging Markets Index fell 1.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0799

• The Japanese yen rose 0.6% to 156.64 per dollar

• The offshore yuan rose 0.2% to 7.2590 per dollar

• The British pound was unchanged at $1.2701

Cryptocurrencies

• Bitcoin rose 0.6% to $67,817.05

• Ether fell 0.3% to $3,738.7

Bonds

• The yield on 10-year Treasuries declined three basis points to 4.59%

• Germany’s 10-year yield declined three basis points to 2.66%

• Britain’s 10-year yield declined two basis points to 4.38%

Commodities

• Brent crude fell 0.3% to $83.36 a barrel

• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Masaki Kondo.

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