US Treasuries Rally as Faith in Fed Pivot Grows: Markets Wrap
(Bloomberg) — Treasuries rose, with the 10-year benchmark yield trading near the lowest since March, as traders put their faith in the Federal Reserve to begin an easing cycle in September.
Contracts for the S&P 500 were steady as traders await US retail sales data later for fresh insights on whether inflation and growth have cooled enough to satisfy policymakers who are deliberating when it’s safe to begin bringing down interest rates.
A soft reading of US retail sales could help fuel the rally in Treasuries, according to strategists at UniCredit SpA led by Marco Valli, global head of research. They expect the Fed to deliver three rate cuts this year, starting in September, and recommend positioning for the yield curve to steepen. So-called steepener trades favor buying short dated notes and selling long bonds.
Fed Chair Jerome Powell said Monday that inflation is heading toward the central bank’s 2% goal on the basis of second-quarter economic data.
“September seems to be a lock-in” for a Fed rate cut, Bruce Richards, the chief executive officer of Marathon Asset Management, said in an interview with Bloomberg TV.
Results from Morgan Stanley and Bank of America Corp. will also influence the mood in markets after fellow banking giant Goldman Sachs Group Inc. reported a surge in earnings Monday.
The dollar strengthened against most of its Group-of-10 peers, with trading driven by speculation that Donald Trump is in a stronger position to win the US presidential election. The yen declined against the greenback on wagers that the Japanese currency will remain weak during a second Trump term.
China traded lower as Trump’s selection of JD Vance as his running mate triggered further trade and geopolitical concerns in the region.
New tariffs of 60% on all Chinese exports to the US would more than halve China’s annual growth rate, according to UBS Group AG, underscoring the risks for Beijing if Trump returns to the White House. Vance told Fox News that China is the biggest threat to the US.
European equities slipped after Hugo Boss cut its profit guidance in the face of weaker demand for high-end fashion. Miners were the worst-performing industry group, as Rio Tinto Group declined after giving disappointing guidance on its copper operations.
Key events this week:
- US retail sales, Tuesday
- Morgan Stanley, Bank of America earnings, Tuesday
- Fed’s Adriana Kugler speaks, Tuesday
- Eurozone CPI, Wednesday
- US housing starts, industrial production, Wednesday
- Fed Beige Book, Wednesday
- Fed’s Thomas Barkin speaks, Wednesday
- ECB rate decision, Thursday
- US initial jobless claims, Philadelphia Fed manufacturing, Conference Board LEI, Thursday
- Fed’s Mary Daly, Lorie Logan and Michelle Bowman speak, Thursday
- Fed’s John Williams, Raphael Bostic speak, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 5:33 a.m. New York time
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 fell 0.4%
- The MSCI World Index fell 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0897
- The British pound was little changed at $1.2960
- The Japanese yen fell 0.2% to 158.44 per dollar
Cryptocurrencies
- Bitcoin fell 1.3% to $62,969.75
- Ether fell 1.4% to $3,388.53
Bonds
- The yield on 10-year Treasuries declined five basis points to 4.18%
- Germany’s 10-year yield declined three basis points to 2.44%
- Britain’s 10-year yield declined four basis points to 4.06%
Commodities
- West Texas Intermediate crude fell 1% to $81.13 a barrel
- Spot gold rose 0.7% to $2,439.17 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Aya Wagatsuma.
©2024 Bloomberg L.P.
