The Treasury saw a decline, following the words of Federal Reserve Chair Jerome Powell stating that policymakers will hold off on cutting interest rates until later this year, leading to significant moves in various global markets. Chinese stocks surged after affirmations of official support, while the impact of Treasury fluctuations rippled through the bond markets of Australia and New Zealand. On Monday, Chinese government bonds saw a decline in 10-year yields, while Hong Kong and mainland China stocks rebounded after a statement from the China Securities Regulatory Commission pledging to actively monitor and prevent stock pledging risks. However, benchmarks in Australia and South Korea, as well as US equity futures, declined.
The dollar strengthened against its major counterparts following Powell’s comments, while the yen made a slight drop to trade at around 148 per dollar. The probability of a rate cut by the Fed in March fell to around 20% from the previous 40% in response to economic resilience. Despite the weakening forecast for a rate cut, the market still expects five rate cuts this year, but Fed officials are expected to resist the notion of so much cutting. The impact of the U.S. vowing more strikes against Iran’s forces and proxies, as well as Houthi retaliation against weekend bombings, has also influenced the oil market, with oil edging higher and gold weakening. Additionally, former President Donald Trump signaled a potential tariff of over 60% on Chinese goods, introducing further hawkish rhetoric.
This week, several key events are expected, including the Eurozone S&P Global Services PMI and PPI, the Eurozone retail sales, and speech from Bank of England Deputy Governor Sarah Breeden. In the market stocks, the S&P 500 futures dropped 0.2% and Nasdaq 100 futures fell 0.3%, while in currencies, the Bloomberg Dollar Spot Index rose 0.2% and Bitcoin fell 0.3% to $42,640.83. Furthermore, the yield on 10-year Treasuries rose five basis points to 4.07%, West Texas Intermediate crude rose 0.6% to $72.73 a barrel, and spot gold fell 0.4% to $2,031.44 an ounce. This news was produced in connection with Bloomberg Automation, with the help of Richard Henderson and Charlotte Yang. © 2024 Bloomberg L.P.