European Stocks, US Futures Slip on Rate-Hike Bets: Markets Wrap

(Bloomberg) — Stocks in Europe declined amid disappointing results from large clothing retailers and worries over Credit Suisse Group AG. US equity futures edged lower and short-end Treasury yields rose as sticky inflation supported bets for further Federal Reserve rate hikes.

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The two-year Treasury yield — the most sensitive to policy moves — climbed six basis points, adding to Tuesday’s 27-point rise, while the 10-year rate dipped four basis points. Contracts on the S&P 500 and Nasdaq 100 fluctuated before turning lower even as a rebound in regional banks continued in premarket trading. A gauge of dollar strength edged higher after four days of declines.

Europe’s Stoxx 600 equity benchmark fell more than 1%, with a gauge of retailers plunging after Zara owner Inditex SA and H&M Hennes & Mauritz AB both flagged slowing sales. Banks declined as shares in Swiss lender Credit Suisse slumped for an eighth straight session after a top shareholder ruled out more assistance. Oil majors also dragged the index lower after this week’s steep drop in crude prices.

Swaps pricing is back to positioning for the Fed to lift rates by a quarter percentage point next week after the odds of an increase had slipped to nearly 50-50 on Monday. The closely-watched core consumer price index increased 0.5% in February, slightly ahead of the median estimate of 0.4% and enough to keep pressure on policy makers.

“Our view is inflation has peaked and the Fed will do one more rate hike of 25 basis points and that’s it,” Mark Matthews, Asia research head at Bank Julius Baer & Co., said on Bloomberg TV.

Traders were also digesting a slew of economic data from China, where retail sales rose as much as estimated while factory output was fractionally lower than projected. The People’s Bank of China added more liquidity than expected while holding a key lending rate unchanged. Rising housing sales provided one clearly positive signal, reflected in a rally in a mainland property index.

Financials were among the biggest gainers Wednesday in Tokyo and Hong Kong, where the Hang Seng Index rose more than 1%. US stocks rallied into the close Tuesday, helping set the scene for the shift in sentiment in Asia.

Remarks from ratings companies on the financial sector underscored that sentiment is likely to remain fragile after the biggest American bank failures since the financial crisis.

Moody’s Investors Service cut its outlook on the sector on the heels of the trio of banking collapses over the past few days. First Republic Bank triggered a volatility halt after S&P Global Ratings placed the company on watch negative.

Elsewhere in markets, oil rose from its lowest close in three months as traders took stock of the outlook for demand. Gold held a drop that took some of the shine off a three-day surge of more than 5%.

Key events this week:

Eurozone industrial production, Wednesday
US business inventories, retail sales, PPI, empire manufacturing, Wednesday
Eurozone rate decision, Thursday
US housing starts, initial jobless claims, Thursday
Janet Yellen appears before the Senate Finance Committee, Thursday
US University of Michigan consumer sentiment, industrial production, Conference Board leading index, Friday

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 fell 1.1% as of 9:23 a.m. London time
S&P 500 futures fell 0.4%
Nasdaq 100 futures fell 0.3%
Futures on the Dow Jones Industrial Average fell 0.4%
The MSCI Asia Pacific Index rose 0.7%
The MSCI Emerging Markets Index rose 0.7%

Currencies

The Bloomberg Dollar Spot Index rose 0.2%
The euro fell 0.1% to $1.0720
The Japanese yen fell 0.2% to 134.44 per dollar
The offshore yuan fell 0.3% to 6.8988 per dollar
The British pound was little changed at $1.2155

Cryptocurrencies

Bitcoin rose 0.9% to $24,850.96
Ether fell 0.1% to $1,703.36

Bonds

The yield on 10-year Treasuries declined three basis points to 3.66%
Germany’s 10-year yield advanced three basis points to 2.45%
Britain’s 10-year yield advanced three basis points to 3.52%

Commodities

Brent crude rose 0.8% to $78.06 a barrel
Spot gold fell 0.8% to $1,888.61 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Tassia Sipahutar.