Stocks squirm as US jobs dry up, Kiwis jump on RBNZ surprise

  • Wall Street snaps winning streak as data turns weak
  • Bonds rise and futures prices in several Fed cuts this year
  • RBNZ hikes 50bps vs expectations to 25; kiwi up 1%

SINGAPORE, April 5 (Reuters) – Stocks struggled to make headway on Wednesday, the dollar pared losses and bonds clung to gains, as signs of a slowing U.S. job market made investors jittery about the economic outlook, while a higher-than-expected interest rate hike lifted kiwi dollar.

Asian trade was thinned by holidays in Hong Kong and China, leaving MSCI’s Asia-Pacific index excluding Japan (.MIAPJ0000PUS) little better than flat, while Japan’s Nikkei (.N225) fell 1.6% and was set to the biggest one-day percentage drop since mid-March.

Futures indicated that European markets were set for a generally lower open, with Eurostoxx 50 futures down 0.26%, German DAX futures down 0.12%. However, FTSE futures were up 0.04%.

Overnight, a four-day winning streak ended for Wall Street indexes, with all three major indexes falling, and interest rate expectations were slashed after data showed U.S. job vacancies hit their lowest level in nearly two years in February.

Two-year Treasury yields, which closely track short-term interest rate expectations, plunged nearly 15 basis points and the dollar followed the move to hit two-month lows.

“The market’s chances of a recession have increased,” Jamie Dimon, chief executive of America’s biggest bank, JPMorgan Chase & Co, said in a letter to shareholders, warning that confidence fears that have rattled banks have not gone away.

“The current crisis is not yet over,” he said. “And even when it’s behind us, there will be ramifications for years to come.”

US interest rate futures have risen sharply in recent weeks, as traders expect that under pressure, banks will tighten lending anyway, sparing monetary policy makers the need to do the job.

The latest futures price implies a better-than-even chance that the Federal Reserve is done raising interest rates, and more than 60 bps in cuts this year.

Two-year yields are at 3.864% and 10-year yields are at 3.352%, with the entire US yield curve below the top of the Fed Funds yield window, which is 5%.

Gold, which offers no yield, hit a one-year high above $2,000 an ounce overnight. It was last up 0.2% at $2,023.27 an ounce. US gold futures rose 0.16% to $2,025.40 an ounce.

“Maybe the Fed sneaks in another (hike), but the probability distribution around the key rate is heavily skewed to the downside,” NatWest Markets head of economics and market strategy John Briggs said.

“We don’t think this is something that’s going to change in market prices anytime soon.”


Outside the US, markets see other central banks staying on course for hikes to curb inflation. A Reuters poll of currency strategists found most expect this to keep pressure on the dollar this year.

The Reserve Bank of New Zealand surprised traders with a 50 basis point hike on Wednesday that sent the kiwi up 1% at one point to hit a two-month high – a contrast to Australia’s central bank, which halted its hikes on Tuesday.

Elsewhere, investors see a few more rate hikes in store in Europe, where German exports have been surprisingly strong. The euro flat at $1.0952, just short of a two-month high it hit the dollar overnight at $1.0973. The kiwi was last up 0.60% at $0.635.

China and Asia more generally are the big hopes for growth.

Japanese data on Wednesday showed services activity grew at the fastest pace in more than nine years in March – even as factory output remained weak.

China’s sprawling manufacturing sector lost momentum in March, data showed earlier this week, even as investment inflows hit a first-quarter record on optimism from foreigners that policy support for business is ahead.

Commodity markets settle after Monday’s rise in oil prices on news of surprise production cuts in OPEC+. US crude rose 0.4% to $81.03 a barrel, while Brent was at $85.31, up 0.44% on the day.

Editing by Sam Holmes; Editing by Stephen Coates

Our standards: Thomson Reuters Trust Principles.

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