Bonds Retreat as Traders Pare Rate Bets; Oil Jumps: Markets Wrap

(Bloomberg) — Government bonds opened the year on a cautious footing as traders trimmed their bets on interest-rate cuts this year. Oil prices jumped as tensions in the Red Sea intensified.

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Yields on 10-year US Treasuries and German bunds added more than five basis points as money markets wagered on fewer than 150 basis points of easing by the Federal Reserve in 2024. Stocks were mixed, with US equity futures little changed, Europe’s Stoxx 600 benchmark 0.2% higher, and Asian shares on the retreat after weak Chinese data.

The price of Brent crude added 2% after Iran dispatched a warship in response to the US Navy’s sinking of three Houthi boats over the weekend. More broadly, traders say there are signs of market exhaustion after a more than $8 trillion surge in the S&P 500 last year.

“We should expect some type of a consolidation, correction, or pullback — something,” John Roque, technical analyst at 22V Research, wrote in a note.

Elsewhere, Bitcoin climbed above $45,000 for the first time in almost two years as anticipation intensifies around the expected US approval for an exchange-traded fund investing directly in the biggest token.

Sentiment in Asia was dented after Chinese President Xi Jinping acknowledged some companies and citizens had endured a difficult 2023 in a rare admission of domestic headwinds facing the country.

Adding to pressure on China’s markets, people familiar said ASML Holding NV, which makes semiconductor manufacturing equipment, canceled shipments of some of its machines to China at the request of US President Joe Biden’s administration.

The yen weakened against all of its Group-of-10 peers in thin trading as investors monitored conditions after an earthquake in Japan on Monday.

Despite the persisting weakness in China, some investors consider a slump of almost 60% is a signal to buy Chinese stocks. Almost a third of 417 respondents to Bloomberg’s latest Markets Live Pulse survey say they will increase their China investments over the next 12 months.

Key events this week:

Eurozone S&P Global Eurozone Manufacturing PMI, Tuesday
UK S&P Global UK Manufacturing PMI, Tuesday
Germany unemployment, Wednesday
US FOMC minutes, ISM Manufacturing, job openings, light vehicle sales, Wednesday
Richmond Fed President Tom Barkin — an FOMC voter in 2024 — speaks, Wednesday
China Caixin services PMI, Thursday
Eurozone S&P Global Eurozone Services PMI, Thursday
US initial jobless claims, ADP employment, Thursday
Eurozone CPI, PPI, Friday
US nonfarm payrolls/unemployment, factory orders, ISM services index, Friday
Richmond Fed President Tom Barkin — an FOMC voter in 2024 — speaks, Friday

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 rose 0.2% as of 10:17 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures fell 0.2%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index fell 0.6%
The MSCI Emerging Markets Index fell 0.6%

Currencies

The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.4% to $1.1000
The Japanese yen fell 0.6% to 141.72 per dollar
The offshore yuan fell 0.3% to 7.1431 per dollar
The British pound fell 0.1% to $1.2708

Cryptocurrencies

Bitcoin rose 4.8% to $45,721.41
Ether rose 3.2% to $2,413.94

Bonds

The yield on 10-year Treasuries advanced seven basis points to 3.95%
Germany’s 10-year yield advanced eight basis points to 2.10%
Britain’s 10-year yield advanced 10 basis points to 3.64%

Commodities

Brent crude rose 2.3% to $78.80 a barrel
Spot gold rose 0.6% to $2,074.68 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Joanna Ossinger and Zhu Lin.