Treasuries Fall on Powell, Chinese Shares Recover: Markets Wrap

(Bloomberg) — Treasuries fell, extending Friday’s selloff after Federal Reserve Chair Jerome Powell said policymakers will likely wait beyond March before cutting interest rates. Chinese stocks swung after signals of official support.

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US 10-year yields climbed around five basis points in Asia after jumping 14 basis points Friday following stronger-than-expected payroll data. The “danger of moving too soon is that the job’s not quite done,” Powell said in an interview on CBS’s 60 minutes that was screened Sunday in the US.

The Treasury declines sent waves across Asian bond markets, weighing on government debt in Australia and New Zealand. Chinese government bonds were an outlier, where 10-year yields fell around two basis points.

Hong Kong and mainland China stocks advanced from earlier losses after the China Securities Regulatory Commission issued another statement Monday, pledging to monitor closely and take effective measures to prevent stock pledging risks. The commission on Sunday said it would act to prevent abnormal fluctuations, and guide more medium- and long-term funds into the market.

“Whether or not today marks the floor to Chinese equities is yet to be seen but it sure feels as though we’re bumping along the bottom as policymakers have signaled they no longer want to see any further declines,” said David Chao, a strategist at Invesco Asset Management.

Benchmarks in Australia and South Korea declined as did US equity futures after the S&P 500 Index climbed 1.1% to a new record on Friday. A strong run of performances for the US benchmark comes as February begins — historically one of the rockiest month of the year for US stocks.

The dollar strengthened against most of its major peers after Powell’s hawkish comments. The yen crept lower to trade at around 148 per dollar.

Investor bets for a rate cut in March by the Fed tumbled Friday to around 20% from almost 40% on Thursday, as economic resilience reduces the likelihood of imminent policy easing.

Despite forecasts for a March rate cut weakening, “this market still expects five rate cuts this year,” Ed Yardeni, president of Yardeni Research wrote in a note. “Fed officials are likely to continue to push back against that notion of so much cutting.”

Oil edged higher as the US vowed more strikes against Iran’s forces and proxies while the Houthis promised to retaliate against bombardments over the weekend. Gold weakened.

Former US President Donald Trump also signaled he may impose a tariff on Chinese goods of more than 60% if elected, in a fresh round of hawkish rhetoric aimed at the largest supplier of goods to the US.

Key events this week:

Eurozone S&P Global Services PMI, PPI, Monday
Australia rate decision, Tuesday
Eurozone retail sales, Tuesday
Germany factory orders, Tuesday
Cleveland Fed President Loretta Mester, Philadelphia Fed President Patrick Harker speak, Tuesday
Bank of England Deputy Governor Sarah Breeden speaks, Wednesday
Fed Governor Adriana Kugler, Richmond Fed President Tom Barkin speak, Wednesday
China PPI, CPI, Thursday
Pakistan general election, Thursday
ECB Chief Economist Philip Lane, ECB Governing Council member Pierre Wunsch speak, Thursday
European Central Bank publishes economic bulletin, Thursday
US initial jobless claims, Thursday
US Treasury Secretary Janet Yellen speaks at a Senate banking committee hearing, Thursday
Australian Reserve Bank Governor Michele Bullock delivers parliamentary testimony, Friday
China aggregate financing, money supply, new yuan loans, Friday
Germany CPI, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.2% as of 2:32 p.m. Tokyo time. The S&P 500 rose 1.1% on Friday
Nasdaq 100 futures fell 0.3%. The Nasdaq 100 rose 1.7%
Japan’s Topix rose 0.7%
Hong Kong’s Hang Seng rose 0.8%
The Shanghai Composite fell 0.1%
Euro Stoxx 50 futures were little changed