Asian Bonds to Track US Rally; Stocks Look Mixed: Markets Wrap

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(Bloomberg) — Bonds are poised to climb in early Asia trading after Treasuries rallied on signs of a cooling US labor market that buoyed rate-cut bets. Stocks are set for a mixed open.

New Zealand bonds rose and futures point to Australian gains after US data showed job openings hit the lowest since 2021. That lifted Treasuries on Tuesday and reinforced speculation that the Federal Reserve will be able to cut rates this year, although stocks struggled to gain much traction. Equity contracts pointed to muted starts in Australia and Hong Kong, and a decline for Japan. 

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To Bill Adams at Comerica Bank, the risk of wage-price pressures fueling inflation is falling, which has the Fed breathing easier than a few years ago. That’s probably why Chair Jerome Powell took it in stride when inflation accelerated earlier this year, saying hikes were unlikely, he noted.

“The evidence is accumulating that the Fed should begin easing,” said Ronald Temple, chief market strategist at Lazard.

Treasury 10-year yields fell six basis points to 4.33%. The S&P 500 edged up to around 5,290.

The MSCI Emerging Market Index fell the most in seven weeks after India stocks had their worst day in more than four years. Narendra Modi pledged to continue as the nation’s prime minister even after his party lost its parliamentary majority. 

Oil fell for a sixth day on Wednesday as OPEC+’s plan to loosen its production curbs this year deepens the market’s bearish sentiment. Copper slid below $10,000. Bitcoin topped $70,000.

Back in the US, the recent economic reports have reinforced the notion that investors are increasingly looking beyond the “Goldilocks” narrative toward something a bit more consistent with the flagging trajectory of consumption,” said Ian Lyngen and Vail Hartman at BMO Capital Markets.

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“There is nothing to imply that the real economy is on the precipice of a recession, however, rather that a no-landing for the labor market appears less likely than it did during the first quarter,” they noted. “Goldilocks is edging toward the door, but has yet to leave the building.”

To Fawad Razaqzada at City Index and Forex.com, while the job openings data caused bond yields to fall, this has been offset by concerns over economic and earnings growth.

“Thus, stocks have not responded in the usual way of cheering on weaker-than-expected data,” he noted. “The questions, are we finally headed for a long overdue correction now? The S&P 500 outlook is not bearish yet from a technical viewpoint, but the potential is there for that to change in the coming days.”

Bank of America Corp. clients fled US equities for a fifth-straight week, withdrawing $5.7 billion from the asset class in the five-day period ended last Friday.

The outflow was the biggest since last July and the fourth-largest in bank’s data history, quantitative strategists led by Jill Carey Hall said. Institutional and hedge fund clients were net sellers as retail investors bought.

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Corporate Highlights:

• Intel Corp. Chief Executive Officer Pat Gelsinger took the stage at the Computex show in Taiwan to talk about new products he expects will help turn back the tide of share losses to peers, including AI leader Nvidia Corp. The company also agreed to sell a stake in a venture that controls a plant in Ireland to Apollo Global Management Inc. for $11 billion, helping bring in more external funding for a massive expansion of its factory network.
• Nvidia Corp. is still working on the certification process for Samsung Electronics Co.’s high-bandwidth memory chips, a final required step before the Korean company can begin supplying a component essential to training AI platforms.
• Paramount Global, the parent of CBS and MTV, is considering joint-venture options for its streaming service and has identified $500 million in annual savings to boost profitability even as it prepares for a probable sale.
• CoreWeave Inc., a closely held cloud computing provider, has offered to acquire Bitcoin miner Core Scientific Inc. for about $1 billion, a person with knowledge of the matter said.
• Airbus SE is negotiating a major sale of A330neo aircraft to China, with talks gaining momentum since President Xi Jinping visited his French counterpart Emmanuel Macron last month.
• Stellantis NV is willing to drop some of its suppliers and make car parts on its own to lower costs in the expensive shift to electrification.

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Key events this week:

• China Caixin services PMI, Wednesday
• Eurozone S&P Global Services PMI, PPI, Wednesday
• Canada rate decision, Wednesday
• US ADP Employment, S&P services PMI, ISM services, Wednesday
• Eurozone retail sales, ECB rate decision, Thursday
• US initial jobless claims, trade, Thursday
• China trade, forex reserves, Friday
• Eurozone GDP, Friday
• US unemployment rate, nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• Hang Seng futures rose 0.2% as of 7:25 a.m. Tokyo time
• S&P/ASX 200 futures were little changed
• Nikkei 225 futures fell 0.8%
• The S&P 500 rose 0.1%; futures were little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The Australian dollar was little changed at $0.6648

Cryptocurrencies

• Bitcoin rose 0.3% to $70,603.26
• Ether rose 0.3% to $3,817.59

Bonds

• The yield on 10-year Treasuries declined six basis points to 4.33%

Commodities

• Spot gold was little changed
• West Texas Intermediate crude fell 0.6% to $72.83 a barrel

This story was produced with the assistance of Bloomberg Automation.

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