Stocks Steady With U.S. Futures; Treasuries Drop: Markets Wrap

(Bloomberg) — Stocks in Europe were steady with U.S. futures Monday as investors brace for bond-market volatility and stimulus withdrawal.

Cyclical stocks like energy and banks tied to economic expansion were among the biggest gainers on the Stoxx Europe 600, offsetting declines in technology firms and real estate. Contracts on both the S&P 500 and Nasdaq 100 inched upward.

Treasury yields extended their climb with the 10-year benchmark moving closer to 2%, sparking a rotation out of high-growth equities and into cheaper cyclical stocks.

Markets face increasing volatility as investors grapple with how to reprice assets as the pandemic liquidity that helped drive equities to record highs is withdrawn. U.S. inflation data this week will be keenly watched as the Federal Reserve prepares to subdue price pressures with faster-than-expected rate increases.

“The U.S. Fed needs to tread carefully in removing policy accommodation – it should not happen too fast otherwise it risks a disruption to the rebound in economic growth and could lead to another ‘taper tantrum,’” Diana Mousina, senior economic in the multi-asset group at AMP Capital, said in a note. She sees more volatility this year from inflation, Fed rate hikes and geopolitics as well as U.S. mid-term elections.

Goldman Sachs Group Inc. now expects the Fed to raise rates four times this year and start its balance sheet runoff process in July, if not earlier.

Elsewhere, Bitcoin traded below $42,000 as cryptocurrencies continue to struggle. Crude oil steadied around $79 a barrel after recording the biggest weekly gain in a month.

Here are some key events this week:

Atlanta Fed President Raphael Bostic discusses the economic outlook Monday
Fed Chair Jerome Powell’s confirmation hearing in the Senate Banking Committee. Tuesday
Kansas City Fed President Esther George, St. Louis Fed President James Bullard discuss economy and monetary policy Tuesday
Wednesday: EIA crude oil inventory report; China PPI, CPI
U.S. CPI Wednesday
U.S. Senate Banking Committee hearing for Lael Brainard, nominated as Fed vice-chair. Thursday
Richmond Fed President Thomas Barkin; Philadelphia Fed President Patrick Harker; Chicago Fed President Charles Evans on economy and monetary policy. Thursday
Bank of Korea policy decision, briefing Friday
Earnings 4Q: Wells Fargo, Citigroup, JPMorgan. Friday
New York Fed President John Williams speaks Friday

For more market analysis, read our MLIV blog.

Stocks

The Stoxx Europe 600 was little changed as of 9:31 a.m. London time
Futures on the S&P 500 rose 0.1%
Futures on the Nasdaq 100 were little changed
Futures on the Dow Jones Industrial Average rose 0.1%
The MSCI Asia Pacific Index rose 0.4%
The MSCI Emerging Markets Index rose 0.7%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro fell 0.2% to $1.1335
The Japanese yen was little changed at 115.66 per dollar
The offshore yuan was little changed at 6.3814 per dollar
The British pound was little changed at $1.3598

Bonds

The yield on 10-year Treasuries advanced three basis points to 1.79%
Germany’s 10-year yield advanced one basis point to -0.03%
Britain’s 10-year yield advanced two basis points to 1.20%

Commodities

Brent crude rose 0.5% to $82.16 a barrel
Spot gold was little changed

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