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Treasuries Fall on Powell, Chinese Shares Recover: Markets Wrap

US Treasury yields experienced a decline, extending a selloff that followed Federal Reserve Chair Jerome Powell’s suggestion that interest rate cuts might not happen until after March. The Asian markets were influenced, witnessing a rise of around five basis points in US 10-year yields in Asia, subsequent to a 14 basis point surge on Friday due to robust payroll data.

Powell, in a CBS interview, emphasized exercising caution, stating, “The danger of moving too soon is that the job’s not quite done,” indicating a measured approach to rate cuts. This had a ripple effect on Asian bond markets, impacting government debt in Australia and New Zealand. Chinese government bonds, however, saw a two-basis-point drop in 10-year yields.

Initially, Hong Kong and mainland China stocks saw a decline but rebounded after the China Securities Regulatory Commission reassured monitoring and effective measures to prevent stock pledging risks. This followed a Sunday statement committing to action against abnormal fluctuations and encouraging more medium- and long-term funds into the market.

Despite these developments, benchmarks in Australia and South Korea, along with US equity futures, witnessed a dip. The S&P 500 had surged 1.1% to a new record on Friday. The dollar gained strength against major peers, and investor expectations for a March rate cut by the Fed dropped to 20%, down from almost 40% on Thursday.

Oil prices experienced a slight increase amid heightened US-Iran tensions, while gold weakened. Former US President Donald Trump added to market concerns by hinting at imposing a tariff of over 60% on Chinese goods if re-elected.

Key events for the week include Eurozone economic indicators, Australia’s rate decision, and speeches from various central bank officials.

Notable market movements:

– S&P 500 futures fell 0.2%
– Nasdaq 100 futures declined 0.3%
– Japan’s Topix rose 0.7%
– Hong Kong’s Hang Seng gained 0.8%
– Shanghai Composite fell 0.1%
– The Bloomberg Dollar Spot Index rose 0.2%
– Bitcoin fell 0.3% to $42,640.83
– Ether fell 0.4% to $2,289.58
– 10-year US Treasury yields advanced five basis points to 4.07%
– WTI crude rose 0.6% to $72.73 a barrel
– Spot gold fell 0.4% to $2,031.44 an ounce.

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