Published: Thu, July 11, 2019
Finance | By Loren Pratt

Bond yields creep higher as markets wait for Fed signals

Bond yields creep higher as markets wait for Fed signals

Treasuries rose and the US dollar fell.

European equities climbed alongside USA futures and Asian stocks as investors cheered fresh signs from central bankers that rates are headed lower.

The Stoxx Europe 600 Index headed for the first gain in five days, with energy companies leading the way as crude oil prices surged. Front-runner Boris Johnson and Jeremy Hunt will appear at events through the week, including a televised debate on July 9.Federal Reserve Chairman Jerome Powell testifies before Congress on monetary policy and the state of the US economy on Wednesday (the House of Representatives) and Thursday (the Senate).Fed minutes are due on Wednesday, ECB minutes on Thursday.A key measure of USA inflation - the core consumer price index, due Thursday - is expected to have increased 0.2% in June from the prior month, while the broader CPI is forecast to remain unchanged.US producer prices are due on Friday. Yields on 10-year Treasuries hit a one-month high.

U.S. stocks ended mixed on Tuesday, as Wall Street waited for the upcoming monetary policy testimony of U.S. Federal Reserve's head to the U.S. Congress, in efforts to search for more signals for further rate cut moves. Shares rallied across most of Asia, with the South Korean and Hong Kong markets outperforming and stocks in China edging higher. The pound halted a drop to a two-year low as data showed the United Kingdom economy rebounded in May.

Minutes from the Federal Reserve's June meeting also showed that officials were more concerned about the economic outlook last month and indicated they were ready to cut if necessary.

To prevent markets getting ahead of themselves beyond July, Powell may articulate that future U.S. policy easing will be dependent on United States economic fundamentals and ongoing trade developments. "That's very supportive for equities".

European Central Bank minutes are due on Thursday.

Topix Index rose 0.4% as of 9:05 am in Tokyo.Kospi Index climbed 0.3%.S&P/ASX 200 was flat.S&P 500 futures fell 0.1%.


A key measure of US inflation - the core consumer price index, due Thursday - is expected to have increased 0.2% in June from the prior month, while the broader CPI is forecast to remain unchanged.

Shares of 3M fell almost 2.1 percent, as Canadian investment bank RBC Capital Markets downgraded the company's stock to "sector perform" from "outperform", due to "eroding" reputation of the USA conglomerate as a "defensive, high-quality industrial".

The Bloomberg Dollar Spot Index dipped 0.1% to the lowest in a week. Shares of American, United Airlines Holdings and Southwest Airlines Co rose between 0.5% and 1.3%.

The dollar edged up to 108.975 yen in Asia, which was its strongest level since May 31.

Yields on short-dated U.S. Treasuries, which had ticked higher in recent sessions after stronger-than-expected employment data on Friday, fell on Powell's remarks.

Expectations for a 50 basis point rate cut at a Fed meeting later this month have evaporated, but investors still expect a 25 basis point rate cut due to weak inflation and worries about the U.S.

The consumer price index (CPI), excluding the volatile food and energy components, rose 0.3% in June.

West Texas Intermediate crude fell 0.1% to $60.39 a barrel.

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