Stocks Dip as Traders Assess Policy Path, Earnings: Markets Wrap

(Bloomberg) — European stocks and US equity futures retreated while bond yields rose as traders assessed the latest corporate earnings reports against the backdrop of yet another hot inflation print from one of the world’s major economies.

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The Stoxx Europe 600 index slipped about 0.3%, with the technology sector leading the decline. ASML Holding NV dropped as much as 4.8% after the Dutch chip maker’s earnings report raised concerns about its demand outlook. Contracts on the rates-sensitive Nasdaq 100 fell about 0.7%, while those on the S&P 500 were down 0.5% ahead of the next batch of earnings reports by US banks.

The UK two-year yield jumped as much as 15 basis points and the country’s stock benchmark underperformed after data showed inflation beat estimates in March, prompting traders to ramp up bets on further Bank of England interest-rate hikes. The Treasury 10-year yield rose 4 basis points. A gauge of the dollar gained.

Amid continuing hawkish talk from policy makers, investors are monitoring earnings reports for signs of how central banks’ attempts to stifle inflation are affecting economic activity. Results from major US lenders so far have been mixed: Goldman Sachs Group Inc. failed to capitalize on Wall Street’s fixed-income boom, contributing to firmwide revenue that trailed estimates. Bank of America Corp. beat profit expectations. Morgan Stanley is due to report later today.

European Central Bank Chief Economist Philip Lane said Tuesday that another increase in interest rates would be appropriate in May. In the US, Bank of Atlanta President Raphael Bostic told CNBC he favors raising interest rates one more time and then holding them above 5% for some time to curb inflation. His St. Louis counterpart James Bullard said he favors getting rates into a 5.5%-to-5.75% range, according to Reuters.

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The benchmark currently sits between 4.75% and 5%. Swaps are pricing in a quarter-point hike by the Fed in May, with rate cuts starting to take place in July.

“That might be too early,” Jonathan Liang, head of…

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