Markets Today: Asian Stocks Set to Fall After Treasury Bills Drop

U.S. stock futures declined as the rally in mega-cap technology stocks lost steam ahead of jobs data that could provide further clues about the outlook for U.S. interest rates.

Contracts on the S&P 500 and Nasdaq 100 fell about 0.4%. Shares of Tesla Inc. fell more than 1% in premarket trading, giving up some of yesterday’s 6% gain. Nvidia Corp., Meta Platforms Inc. and Apple Inc. also fell.

Pharmaceutical company Eli Lilly & Co. fell more than 1 percent after President Biden and Sen. Bernie Sanders urged European peer Novo Nordisk A/S to cut prices for Ozempic and Wegovy. Paramount Global rose on reports that Barry Diller is considering a bid.

The yield on 10-year Treasury notes slowed Monday’s rise, fueled by speculation that a Donald Trump presidency would lead to larger U.S. budget deficits and higher inflation. The dollar gauge was steady.

Recent data shows that U.S. inflation is slowing, which is supportive for stocks in the near term, said Bhanu Baweja, chief strategist at UBS. But signs of slowing economic growth will weigh on stocks in the medium term, requiring defensive positioning, he said on Bloomberg TV.

“The central pillar of where markets are likely to go over the next six months is a decline in US inflation, followed by a decline in US growth,” Baweja said. “We are broadly risk averse in equities.”

Still, it would take a major blow to market sentiment to derail the flow of cash into the big tech names that have led the market’s advance in 2024, according to David Kelly of JPMorgan Asset Management.

Treasury bonds were shaken

U.S. Treasuries have been on a rollercoaster ride this year, with traders swinging between buying bonds amid signs of slowing U.S. prices and fears of higher rates over the long term. Yields on five-year bonds have climbed more than 20 basis points from a low of about 4.20% just under three weeks ago.

After last week’s debate dented Joe Biden’s reelection chances, Wall Street strategists including those at Goldman Sachs Group Inc., Morgan Stanley and Barclays Plc. are taking a fresh look at the potential implications of a Trump victory for the bond market. They are urging clients to position for stable inflation and higher long-term yields.

Strategists at JPMorgan Chase & Co., meanwhile, say now is the time to take profits on Treasuries.

Federal Reserve Chairman Jerome Powell’s speech at an ECB forum in Portugal could provide further clues about the outlook for monetary policy. The ECB’s Christine Lagarde is also expected to speak.

Jobs

Traders will also be watching U.S. job openings data later Tuesday. Strong hiring has so far helped the economy weather aggressive Fed tightening, which has pushed interest rates to their highest levels in two decades. With inflation still above the central bank’s 2% target, there are concerns that further easing of labor conditions could snowball and jeopardize economic growth.

Meanwhile, European stocks fell after policymakers signaled they needed more evidence that price pressures were under control, even as the latest data showed inflation in the euro region was moderating slightly.

The Stoxx Europe 600 index lost about 0.7%, led by insurers and carmakers. France’s CAC 40 erased most of its gains from Monday as the country prepares for a second round of elections and the outlook for French assets remains uncertain.

Consumer prices in the euro zone slowed in June in line with economists’ estimates, although the core measure, which excludes volatile items such as food and energy, was unexpectedly unchanged.

Price pressures

After cutting interest rates by a quarter-point in June, ECB officials are trying to determine whether inflation is moderate enough to allow further cuts. At the ECB’s annual meeting this week in Sintra, Portugal, President Christine Lagarde and chief economist Philip Lane said there was no convincing evidence yet that the threat had passed.

“Christine Lagarde has delivered her message very well,” said Frederique Carrier, head of investment strategy at RBC Wealth Management. “We don’t expect a change in July, but rather in September and December.”

European stocks have been held back by political turmoil in recent weeks following the call for early elections in France. The first round of parliamentary elections narrowed the possible outcomes to two, suggesting prolonged uncertainty for investors. The second round of voting is scheduled for Sunday.

“We expect France to be more difficult to govern, that there will be fewer reforms, this is not positive,” said Mr. Carrier.

Among individual stocks, shares of catering company Sodexo SA reported a decline in third-quarter revenue, below expectations. Tire maker Michelin declined in Paris, with analysts citing an early closing call after markets closed Monday.

Shares of HelloFresh SE jumped after JPMorgan said data showed stabilization in the key North American meal kit business. Siemens Energy AG climbed 4.3% after the Financial Times reported the company plans to hire more than 10,000 new employees in its power grid business.

Asian stocks advanced, led by gains in Japan and Hong Kong. The MSCI AC Asia Pacific Index hit its highest level since late May, amid a rebound in Hong Kong-listed homebuilder and electric vehicle shares.

In commodities trading, oil hit a two-month high on escalating tensions in the Middle East and concerns about the early start to the Atlantic hurricane season. Iron ore held at its highest level in about a month. Gold was little changed.

Main events of the week:

• Job openings in the United States, Tuesday
• Jerome Powell and Christine Lagarde speak at an ECB forum in Portugal on Tuesday
• Caixin China Services PMI, Wednesday
• S&P Global PMI and Eurozone Services PPI, Wednesday
• US Fed Minutes, ADP Employment, ISM Services, Factory Orders, Initial Jobless Claims, Durable Goods, Wednesday
• Fed Chairman John Williams Speaks Wednesday
• UK General Election, Thursday
• United States Independence Day holiday, Thursday
• Eurozone retail sales, Friday
• US jobs report, Friday
• Fed Chairman John Williams Speaks Friday

Some of the main movements in the markets:

Actions

• S&P 500 futures fell 0.4% as of 8:30 a.m. New York time.
• Nasdaq 100 futures fell 0.5%
• Dow Jones Industrial Average futures fell 0.3%
• The Stoxx Europe 600 fell by 0.7%.
• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.1% to $1.0728
• The pound was little changed at $1.2656.
• The Japanese yen was little changed at 161.55 per dollar.

Cryptocurrencies

• Bitcoin fell 0.9% to $62,669.38
• Ether fell 0.6% to $3,444.18

Obligations

• The yield on 10-year Treasury notes fell two basis points to 4.44%
• Germany’s 10-year yield fell one basis point to 2.60%
• The UK 10-year yield fell four basis points to 4.24%.

Raw materials

• West Texas Intermediate crude oil rose 1% to $84.19 a barrel
• Spot gold fell 0.4% to $2,322.32 an ounce

This story was produced with assistance from Bloomberg Automation.

–With assistance from Sagarika Jaisinghani and Michael Msika.