Stocks and bonds faced a retreat as the recent tech-led bounce lost momentum, reigniting investor concerns ranging from inflation to bond volatility. US stock futures and Europe’s Stoxx 600 benchmark both declined, influenced by the tech sector relinquishing some of Monday’s gains. Additionally, Spanish blood plasma company Grifols SA witnessed a plunge in both its shares and bonds following a critical report from short seller Gotham City Research LLC, which raised questions about the company’s financial reporting.
Investors are currently on the sidelines as they await the release of the US inflation report on Thursday and the commencement of the earnings season on Friday. Simultaneously, many are preparing for a significant influx of debt supply expected on Tuesday, projected to reach at least €43.2 billion ($47 billion), surpassing the record set in 2023, according to Bloomberg data.
BlackRock Inc. issued a warning about the potential risks associated with debt-fueled government spending, particularly in an election year. Government bonds, including those from the UK, Italy, and Belgium, experienced a decline in the face of increased supply.
Evelyne Gomez-Liechti, a strategist at Mizuho International, remarked that the new year is already testing the 2023 Santa rally, citing pressures such as unexpected US labor strength, an extended rally, and a heavy supply of new government and corporate debt.
The US benchmark 10-year yield, holding above 4%, received criticism from former bond king Bill Gross, who labeled it “overvalued.” Last week, it surged 17 basis points as strong labor-market data prompted traders to reduce bets on rapid Fed easing. Meanwhile, long-dated Gilts in Europe experienced notable declines after the UK government sold £2.25 billion ($2.9 billion) of 20-year debt.
The previous tech rally in US stocks, particularly led by Nvidia Corp.’s announcement of new artificial-intelligence products, proved short-lived. While the Nasdaq 100 experienced its most significant jump since November, the S&P 500 traded near a record high, and Japan’s Nikkei 225 index reached levels unseen since March 1990.
In other markets, Bitcoin retraced after surpassing $47,000 on speculations regarding the approval of the US’s first exchange-traded funds investing directly in the digital asset. Oil rebounded from a significant drop, displaying signs of a weaker physical market.
Key Events This Week:
- China aggregate financing, money supply, new yuan loans on Tuesday.
- Eurozone unemployment and Germany industrial production on Tuesday.
- US trade and wholesale inventories on Wednesday.
- US CPI and initial jobless claims on Thursday.
- China CPI, PPI, and trade on Friday.
- UK industrial production and US PPI on Friday.
- Some major US banks reporting fourth-quarter results on Friday.
Market Movements:
- S&P 500 futures fell 0.4%, Nasdaq 100 futures fell 0.5%, Dow Jones Industrial Average futures fell 0.4%, Stoxx Europe 600 fell 0.3%, and MSCI World index was little changed.
- The Bloomberg Dollar Spot Index rose 0.1%, the euro fell 0.1% to $1.0936, the British pound fell 0.2% to $1.2722, and the Japanese yen rose 0.2% to 144.00 per dollar.
- Bitcoin fell 0.8% to $46,722.61, and Ether fell 1.6% to $2,300.99.
- The yield on 10-year Treasuries advanced one basis point to 4.04%, Germany’s 10-year yield advanced five basis points to 2.19%, and Britain’s 10-year yield advanced four basis points to 3.82%.
- West Texas Intermediate crude rose 2.4% to $72.44 a barrel, and spot gold rose 0.4% to $2,036.22 an ounce
