US treasuries steadied along with the yen after a drop on Wednesday that was spurred by traders scaling back bets on US interest rate cuts.
Benchmark 10-year US yields fell two basis points, partly erasing the prior session’s increase when it hit the highest level in almost three months. An index of the dollar was little changed while Japan’s currency stabilized after sliding over 1% in the previous session.
Equities in Hong Kong, China and South Korea retreated while shares in Australia edged higher. Japan’s Nikkei 225 climbed as tech shares rebounded on solid earnings from Tesla and SK Hynix.
Market players have trimmed bets on the pace of US Federal Reserve easing, with swap traders less than 100% certain of rate cuts over the two remaining policy meetings this year. The term premium on 10-year Treasury notes — an expression of the extra yield investors demand for owning the debt rather than rolling over shorter-term securities — also hit the highest since November.
“The price of options to hedge against Treasury losses is soaring,” said Andrew Brenner at NatAlliance Securities. “In the US, it is about the election and potential sweep. That is what is being built into the rate structure, which is giving the vigilantes the green light. It will reverse, but it might take a severe employment number or a surprise in the election.”
See also: BOK surprises with rate cut as Trump win boosts trade risks
The presidential contest between Donald Trump and Kamala Harris could hardly be tighter, with the candidates statistically tied among likely voters in each of the seven swing states in the Bloomberg News/Morning Consult poll.
Elsewhere, Taiwan Semiconductor Manufacturing Co. halted shipments to a client after discovering that chips made for that client ended up with Huawei Technology Co., potentially violating US sanctions.
In South Korea, SK Hynix Inc.’s shares gained after the firm posted record quarterly profit and revenue.
See also: ECB’s Schnabel sees only limited room for further rate cuts
A pullback in US and Asia-based tech and artificial intelligence companies has opened up an attractive entry point, Julia Wang, executive director and global market strategist, JPMorgan Private Bank, said on Bloomberg Television.
“The Treasury yield move and the relentless move in the dollar have clouded investor risk appetite, but we are looking at the medium term and there is no reason this shouldn’t be a great buy-the-dip opportunity,” Wang said.
US big tech stocks climbed in late hours as Tesla kicked off the “Magnificent Seven” earnings season with better-than-estimated results. The carmaker jumped 8% after reporting adjusted earnings above the average analyst estimate. The firm also said it expects to achieve slight growth in vehicle deliveries for the full year.
“Earnings season is heating up,” said David Laut at Abound Financial. “We believe there is continued upside ahead for stocks, especially now that we are entering a seasonally strong period of the year for markets.”
In commodities, oil rose after retreating on Wednesday, as traders assessed tensions in the Middle East and the outlook for market balances heading into 2025. Gold edged higher following its biggest daily drop in 11 weeks.
Key events this week:
- US new home sales, jobless claims, S&P Global Manufacturing and Services PMI, Thursday
- UPS, Barclays earnings, Thursday
- Fed’s Beth Hammack speaks, Thursday
- US durable goods, University of Michigan consumer sentiment, Friday
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Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 9:08 a.m. Tokyo time
- Hang Seng futures fell 1%
- Japan’s Topix fell 1%
- Australia’s S&P/ASX 200 fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was unchanged at $1.0782
- The Japanese yen was little changed at 152.69 per dollar
- The offshore yuan was little changed at 7.1331 per dollar
Cryptocurrencies
- Bitcoin was little changed at $66,569.68
- Ether rose 0.3% to $2,519.39
Bonds
- The yield on 10-year Treasuries was unchanged at 4.25%
- Japan’s 10-year yield was little changed at 0.975%
- Australia’s 10-year yield advanced one basis point to 4.48%
Commodities
- West Texas Intermediate crude rose 0.6% to $71.21 a barrel
- Spot gold rose 0.1% to $2,719.13 an ounce
This story was produced with the assistance of Bloomberg Automation.
