US Futures Boosted By Big Tech Earnings, But Inflation-Driven Rise In Bond Yields Keeps Investors Wary

Hot air balloons with various characters fly over the Göreme district.
  • US futures edged up slightly, supported by optimism about tech earnings, despite rising government bond yields.
  • Inflation concerns have pushed two-year Treasury yields to their highest level since the start of the pandemic.
  • In crypto, the dogecoin derivative token Shiba Inu jumped 30% to record highs.

U.S. equity futures edged higher on Wednesday, after Big Tech’s windfall profits offset a sharp rise in government bond yields that reflected investor expectations for rapid rate hikes to stem the inflation.

Futures on the S&P 500 and Dow Jones rose 0.1%, while those on the Nasdaq 100 gained 0.2% in European trading. Benchmarks hit all-time highs the day before after strong earnings from Microsoft and Twitter.

Yields on two-year U.S. Treasuries – the most sensitive to investors’ interest rate expectations – hit their highest level since the pandemic began in March of last year, closing the gap with those of the 10-year notes in what is called a flattening of the curve.

The two-year notes were last at 0.507%, up 6 basis points on the day, established for their biggest monthly gain since November 2016, while the 10-year notes returned 1.622%, raising the gap between the two at its lowest in two months. .

“It should be evident by now that the market’s focus of attention is on the (perceived) need for central banks to anticipate rising inflation,” said Padraig Garvey, regional research manager for the Americas at ING.

“What is clear is that initial rates are now the most important part of any yield curve. They are the proverbial tail wagging the dog: When upside conviction increases, the long run tends to s ‘flatten, and vice versa, “he said. .

Inflation has soared higher around the world, with the price of everything from basic groceries and utility bills to major commodities hitting multi-year or even record highs as global activity picked up after the worst of the pandemic.

In Europe, traders were awaiting the UK government’s fall budget, due later Wednesday, and the results of a European Central Bank policy meeting on Thursday. British Chancellor Rishi Sunak is expected to widely unveil a series of new spending measures.

“Public sector wage increases, a huge injection of money for the NHS, investments in regional transport, skills, housing and education, plus a freeze on fuel taxes, but the devil will be in the details, in terms of how much it’s likely to cost, ”said Michael Hewson, chief markets strategist at CMC Markets.

The FTSE 100 barely changed, down 0.1% on the day, while the pound was down around 0.1% against the dollar and the euro. Elsewhere in markets, the pan-European Stoxx 600 eased 0.2%, after hitting three-month highs the day before, while in Asia, the Shanghai Composite fell 1.0% and the Hang Seng fell 1.7%, driven by lingering concerns over the struggling real estate sector.

In the cryptocurrency sector, dogecoin spinoff Shiba Inu climbed more than 30% to new highs above $ 0.00005940, after hundreds of thousands of Robinhood users asked the trading application to add the token to its offer. Bitcoin, meanwhile, was down 3.2% to around $ 60,400, down around 10.5% from a record high of almost $ 67,000 a week ago.

Read more: Two of the world’s largest asset managers are divided over the prospect of 1970s-style stagflation – here’s why BlackRock and Deutsche Bank disagree and how retail investors can navigate the potential mix of ” high inflation and low growth

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