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Bond Yields Rise, Jobless Claims, Kazakh Mayhem - What's Moving Markets

EconomyJan 06, 2022 06:49AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- Bond yields rise around the world as the minutes from the Federal Reserve's latest policy meeting sketch out a more aggressive monetary tightening this year than previously expected. Tech stocks are expected to give up further ground when they open later but financials and other cyclicals are holding up better. Weekly jobless claims and the Challenger job cuts flesh out the picture from a tightening labor market. Corona-brewer Constellation Brands (NYSE:STZ) and Walgreens both report earnings, and Russia and its allies are set to send troops into Kazakhstan to try to quell violent protests that have seen various government and police buildings stormed around the country. Here's what you need to know in financial markets on Thursday, January 6th.

1. Bonds spooked by Fed minutes

Bond yields continued to head higher, putting fresh pressure on tech stocks and risk assets more generally, after the minutes from the latest Federal Reserve meeting raised the possibility of the Fed reversing some of the last two years’ asset purchases.

The minutes from the Fed’s December meeting not only indicated that the first interest rate this year may come as early as March, but also noted that some policy makers mooted the idea of selling part of the $8.7 trillion in bonds that the Fed has accumulated on its balance sheet over the last decade through its ‘quantitative easing’ policies.

The benchmark United States 10-Year yield rose as high as 1.74% in overnight trading, its highest since April last year. The 30-Year yield rose to a three-month high of 2.13%. That also pulled global bond yields higher, as investors were forced to reprice the risk of other central banks raising interest rates to keep pace with the Fed’s tightening.

2. Jobless claims, ISM services survey due

The series of labor market data releases continues with the publication of last week’s jobless claims at 8:30 AM ET (1330 GMT) and the Challenger job cuts survey for December, which are both likely to confirm a picture of labor hoarding by businesses already struggling with capacity constraints.

The ADP payrolls report on Wednesday came in at twice the expected number, as the cut-off date for the survey helpfully came before the first impacts of the Omicron strain of Covid-19.

Elsewhere, the Institute of Supply Management will publish its non-manufacturing survey, which will draw attention for what it says about how higher labor costs are affecting service companies and their pricing decisions.

3 Stocks set to open mixed; tech set to come under pressure again

All of the above is likely to put fresh pressure on ‘profitless tech’ stocks in particular at the opening later.

As of 6:20 AM ET, Nasdaq 100 futures were down another 0.4% at their lowest in four weeks, while S&P 500 futures were holding their own and Dow futures were up 85 points, or 0.2%, with the rise in bond yields supporting financial stocks in particular.

Stocks likely to be in focus later include Nike (NYSE:NKE), which has launched legal action against athleisure-wear company Lululemon Athletica (NASDAQ:LULU). Constellation Brands, the brewer of what has been for the last two years the world’s most unfortunately named beer, reports earnings later, as do ConAgra Foods (NYSE:CAG) and Walgreens Boots (NASDAQ:WBA).

4. Russia set to send troops into Kazakhstan

Russia and its allies will send troops to quell protests in neighboring Kazakhstan that have reportedly led to dozens of deaths over the last two days. Protests against years of kleptocracy, triggered by the latest sharp rise in fuel prices, have flared up all around what is the world’s ninth-largest country.

The protests threaten to disrupt exports of oil and gas not just from Kazakhstan but also from Turkmenistan further south. Both are significant suppliers of natural gas to China. Kazakhstan is also a big exporter of copper and the world’s largest exporter of Uranium.

The country’s largest onshore oil project, which is operated by a Chevron-led venture, has also been affected by the protests.  The protests came after the 10th anniversary of a massacre of striking oil workers in the town of Zhanaozhen by the security forces of then-President Nursultan Nazarbayev, who has continued to exercise power behind the scenes since leaving the presidency two years ago.

5. Oil rises on Kazakh, OPEC worries

Crude oil prices rose in response to developments in Kazakhstan, and on the growing awareness that the promise by OPEC and Russia to raise oil output in February is likely to prove impossible to fulfil, due to past underinvestment.

Only two big producers in the world – Saudi Arabia and the United Arab Emirates - are currently able to pump more oil than they did two years ago, according to Goldman Sachs’ head of commodity research Jeff Currie.

That will make it difficult to replenish global inventories that are now below their five-year historic averages – unless the continued spread of Omicron-variant Covid-19 leads to more aggressive measures to reduce mobility, or at least less demand for travel. A sharp rise in U.S. gasoline inventories last week suggests that that is far from impossible

By 6:30 AM ET, U.S. crude futures were up 1.4% at $78.98 a barrel, while Brent was up 1.3% at $81.87 a barrel.

Bond Yields Rise, Jobless Claims, Kazakh Mayhem - What's Moving Markets
 

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Comments (5)
Jerry Nix
Jerry Nix Jan 06, 2022 7:11AM ET
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If the ******Fed would do something and quit talking about doing it the markets would be OK a whole lot faster. All they want to do is put fear into the minds of people and drive the market crazy. they should not be allowed to comment publicly on what they are thinking.
Suvarna Patil
Suvarna Patil Jan 06, 2022 7:11AM ET
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100 %
Laid Zipleen
Laid Zipleen Jan 06, 2022 6:58AM ET
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Always the same Fed bla-bla-bla. QE is the road of no return, the road to ********
Laid Zipleen
Laid Zipleen Jan 06, 2022 6:58AM ET
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road to He1l
Adriana Jimenez
Adriana Jimenez Jan 06, 2022 6:57AM ET
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what are the tickers for bonds 10 year yield and 30 year yield? I found TLT and TLH but technically speaking I didn't see any increasement at the post market, thanks
Mohamed Khadar
Mohamed Khadar Jan 06, 2022 6:55AM ET
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i want invest but i dont have any money to invest
Matthew Onu
Matthew Onu Jan 06, 2022 6:55AM ET
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have you tried robbing a bank?
The Anti Sheep
The Anti Sheep Jan 06, 2022 6:53AM ET
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Blah blah. Dow 50,000 this year & more inflation
 
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