Market fluctuates ahead of Fed speakers

Stocks and bonds fluctuated as investors awaited the latest signals on interest rates from Federal Reserve officials and considered the impact of China’s efforts to prop up its market. 

Europe’s Stoxx 600 benchmark edged higher, while US equity futures posted small moves. US government bonds were flat ahead of a record $42 billion sale of 10-year Treasuries on Wednesday. A gauge of Asian equities reached its highest in more than a month.

Treasuries have steadied after strong economic data triggered a two-day slump and market bets on the speed of Fed rate cuts were dialed back. Central bank officials kept to their cautious tone on Tuesday, indicating that more progress is needed on inflation though rate reductions may be possible later in the year.

“The Fed members are on the battlefield, fighting the doves,” Ipek Ozkardeskaya, senior analyst at Swissquote Group Holdings SA, wrote in a note. “The game is now being played for a May cut.”

Fed Bank of Cleveland President Loretta Mester said on Tuesday policymakers will probably gain confidence to cut interest rates “later this year,” while Neel Kashkari indicated more progress on inflation is needed. The European Central Bank’s Isabel Schnabel said policy makers must be “patient and cautious.”

Adriana Kugler and Tom Barkin from the Fed are among the speakers due Wednesday. 

NYCB Jitters

Meanwhile, the collapse in the shares of New York Community Bancorp and its credit downgrade to junk by Moody’s Investors Service is also in focus. Treasury Secretary Janet Yellen said regulators are working to ensure that reserves and liquidity in the financial system can cope with losses in the commercial real estate sector. 

“The next move from the Fed is most probably loosening of financial conditions — that should help the sector as a whole,” Swissquote’s Ozkardeskaya wrote. That’s why NYCB “hasn’t triggered a domino effect across the banking sector,” she said.  

In Asia, shares in Hong Kong dipped while those on the mainland whipsawed before moving higher again, pointing to doubts over the potency of Beijing’s measures to stabilize the market. Volatility is likely to be elevated as Chinese markets are closed for a weeklong Lunar New Year holiday starting Friday. 

In other markets, oil traded in a narrow range after two days of gains as geopolitical risk in the Middle East was partially offset by a report showing stockpiles expanding in the US.

Key events this week:

• Walt Disney earnings, Wednesday
• Fed’s Adriana Kugler and Tom Barkin speak, Wednesday
• China PPI, CPI, Thursday
• US wholesale inventories, initial jobless claims, Thursday
• Treasury Secretary Janet Yellen speaks at a Senate banking committee hearing on the Financial Stability Oversight Council annual report, Thursday
• Pharma CEOs speak at a Senate panel on prescription drug prices, Thursday
• ECB Chief Economist Philip Lane speaks, Thursday
• ECB publishes economic bulletin, Thursday
• US CPI revisions, Friday
• Germany CPI, Friday
• President Joe Biden hosts German Chancellor Olaf Scholz at the White House, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 was little changed as of 8:57 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures were little changed
• Futures on the Dow Jones Industrial Average were little changed
• The MSCI Asia Pacific Index rose 0.4%
• The MSCI Emerging Markets Index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0763
• The Japanese yen was little changed at 148.08 per dollar
• The offshore yuan was little changed at 7.2082 per dollar
• The British pound rose 0.2% to $1.2624

Cryptocurrencies

• Bitcoin fell 0.6% to $42,896.58
• Ether fell 0.8% to $2,360.51

Bonds

• The yield on 10-year Treasuries was little changed at 4.10%
• Germany’s 10-year yield was little changed at 2.28%
• Britain’s 10-year yield advanced two basis points to 3.97%

Commodities

• Brent crude rose 0.4% to $78.92 a barrel
• Spot gold fell 0.2% to $2,032.90 an ounce

This story was produced with the assistance of Bloomberg Automation.

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