Treasuries Fall as Powell Adds to Payrolls Blow: Markets Wrap

(Bloomberg) — Treasuries resumed a selloff and most Asian equities fell after Federal Reserve Chair Jerome Powell said policymakers will likely wait beyond March before cutting interest rates, compounding the effect of Friday’s stronger-than-expected US jobs data.

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The US 10-year yield climbed as much as seven basis points as Powell spoke on CBS’s 60 minutes, extending its advance made Friday when it rose 14 basis points. Powell’s appearance, broadcast Sunday in the US, was recorded prior to jobs data released Friday that showed US companies boosted payrolls in January by the most in a year.

The Treasury declines rippled across Asian bond markets, weighing on government debt in Australia and New Zealand, where yields rose around 10 basis points. Chinese government bonds were an outlier, where 10-year yields fell around two basis points.

Shares in China fell, extending losses made on Friday. The CSI 300 dropped more than 1%, while the CSI 1000 gauge of small caps slipped almost 8. The declines came despite a statement on Sunday from the China Securities Regulatory Commission saying it would act to prevent abnormal fluctuations, and guide more medium- and long-term funds into the market.

Benchmarks in Australia, South Korea and Hong Kong also fell. US equity futures drifted lower after the S&P 500 Index climbed 1.1% to a new record on Friday. A strong run of performances for the US benchmark comes as February begins — historically one of the rockiest month of the year for US stocks.

Japanese equities bucked the trend by rising. Mitsui Fudosan shares jumped after the Financial Times reported Elliott Management had acquired a 2.5% stake in the business and was calling for a share buyback.

The dollar strengthened against most of its major peers. The yen edged lower to trade at around 148 per dollar.

Investor bets for a rate cut in March by the Fed tumbled Friday to around 20% from almost 40% on Thursday, as economic resilience reduces the likelihood of imminent policy easing.

Despite forecasts for a March cut weakening, “this market still expects five rate cuts this year,” Ed Yardeni, president of Yardeni Research wrote in a note. “Fed officials are likely to continue to push back against that notion of so much cutting.”

Oil was little changed as traders assessed the impact of US and UK strikes against Houthi targets over the weekend. The Iran-backed Houthis have vowed to respond. West Texas Intermediate was little changed, after falling 7.4% last week, its largest one-week decline since October. Gold fell slightly to trade at around $2,037 per ounce.

Former US President Donald Trump also signaled he may impose a tariff on Chinese goods of more than 60% if elected, in a fresh round of hawkish rhetoric aimed at the largest supplier of goods to the US.

Key events this week:

Eurozone S&P Global Services PMI, PPI, Monday
Australia rate decision, Tuesday
Eurozone retail sales, Tuesday
Germany factory orders, Tuesday
Cleveland Fed President Loretta Mester, Philadelphia Fed President Patrick Harker speak, Tuesday
Fed Governor Adriana Kugler, Richmond Fed President Tom Barkin speak, Wednesday
Bank of England Deputy Governor Sarah Breeden speaks, Wednesday
CPI data for Brazil, China, Russia, Thursday
US initial jobless claims, Thursday
US Treasury Secretary Janet Yellen speaks at a Senate banking committee hearing, Thursday
Pakistan general election, Thursday
ECB Chief Economist Philip Lane, ECB Governing Council member Pierre Wunsch speak, Thursday
European Central Bank publishes economic bulletin, Thursday
Canada unemployment, Friday
China aggregate financing, money supply, new yuan loans, Friday
Germany CPI, Friday
Australian Reserve Bank Governor Michele Bullock delivers parliamentary testimony, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.3% as of 11:41 a.m. Tokyo time
Nasdaq 100 futures fall 0.3%
Japan’s Topix rose 0.8%
Australia’s S&P/ASX 200 fell 0.9%
Hong Kong’s Hang Seng fell 0.7%
The Shanghai Composite fell 2.6%
Euro Stoxx 50 futures were little changed

Currencies

The Bloomberg Dollar Spot Index rose 0.2%
The euro was little changed at $1.0778
The Japanese yen was little changed at 148.45 per dollar
The offshore yuan was little changed at 7.2118 per dollar

Cryptocurrencies

Bitcoin fell 0.9% to $42,384.43
Ether fell 0.9% to $2,278.36

Bonds

The yield on 10-year Treasuries advanced five basis points to 4.07%
Japan’s 10-year yield advanced 5.5 basis points to 0.715%
Australia’s 10-year yield advanced 11 basis points to 4.09%

Commodities

West Texas Intermediate crude was little changed
Spot gold fell 0.2% to $2,035.67 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Garfield Reynolds.