Asia Stocks Set For Mixed Start As Treasuries Drop: Markets Wrap

A commuter walks past a Hokuso-Railway Co. train at the platform of Chiba Newtown Chuo station in Inzai, Chiba Prefecture, Japan, on Monday, March 8, 2020. Japanese Prime Minister Yoshihide Suga extended by two weeks a virus state of emergency for the Tokyo region that has expired on Sunday, trying to maintain a declining trend in infections as the country looks to host the Olympics in about four months.

(Bloomberg) -- Asian equity futures point to a mixed opening as trading resumes in most of the region's markets following a holiday on Monday. Investors are weighing JPMorgan Chase & Co.'s purchase of First Republic Bank along with expectations the Federal Reserve will hike interest rates once again this week.

Japanese stocks are poised to rise while Hong Kong and Australian shares may open little changed. With US shares steady on Monday, attention turned to the Treasury market, where investment-grade issuance jumped to more than $22 billion in one of the busiest sessions of 2023.

Several borrowers are piling in after exiting their earnings blackouts. Among notable firms tapping the market: Meta Platforms Inc. raised $8.5 billion, Comcast Corp. priced a $5 billion deal and Hershey Co. sold $750 million in bonds.

Rising corporate bond offerings in the US usually represent a double-whammy for Treasuries, which tend to fall amid competition from new debt and as underwriters sell government notes to rate-lock the issue for corporate buyers. Another factor weighing on bond prices Monday was the stabilization in sentiment after JPMorgan acquired First Republic.

US Treasuries sold off across the curve Monday, with yields on 30-year bonds climbing the most in 2023 and those on 10-year notes approaching 3.6%. Equities were little changed after notching two straight months of gains as traders waded through a batch of corporate results.

US factory data brought little comfort on the inflation front, and stock investors holding on to optimism the Fed will cut rates in the second half may be disappointed this week, according to Morgan Stanley strategist Michael Wilson.

“If the message delivered at this meeting is more hawkish, it could provide a near-term negative surprise for equities,” Wilson wrote in a note.

Fed Decision

While swap traders have slightly upgraded the odds that the Fed will increase its policy rate by a quarter-point Wednesday, Australia's central bank on Tuesday is set to extend a pause in rate increases following a deceleration in inflation.

Elsewhere in Asia, Singapore and Hong Kong markets will reopen after a public holiday. While China will stay closed until Thursday, concerns remain about its economy's patchy emergence from the pandemic lockdowns. The latest indicators point to a contraction in manufacturing, while consumers splurge over the holidays and the housing market continues to rebound.

To Krishna Guha at Evercore, trading suggests little or no spillover from the First Republic situation, which is consistent with the notion that there's roughly no surprise here and the market would be willing to distinguish between First Republic and other financial firms.

“The decisive action by regulators clears the decks for the Fed to press ahead and raise rates at its May meeting,” Guha said. “Our base case is that the economy cools from here, the Fed will not hike further after May and the next move will be a cut in December.”

Key events this week:

US JOLTS job openings, factory and durable goods orders, Tuesday
ADP employment, S&P global US services PMI, ISM services, Wednesday
Fed Chair Jerome Powell holds news conference following rate decision, Wednesday
US initial jobless claims, trade balance, Thursday
European Central Bank rate decision, followed by ECB President Christine Lagarde's news conference, Thursday
US unemployment, nonfarm payrolls, Friday

WATCH: Saira Malik at Nuveen talks about markets.Source: Bloomberg

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.2% as of 7:26 a.m. Tokyo time. The S&P 500 was little changed
Nasdaq 100 futures fell 0.2%. The Nasdaq 100 fell 0.1%
Nikkei 225 futures rose 0.3%
Hang Seng futures were unchanged
S&P/ASX 200 futures were little changed

Currencies