US assets get boost, stock futures rise

by Andre Janse van Vuuren and Sujata Rao

US Treasuries, stock futures and the greenback advanced after Japan indicated it’s considering a reduction in bond issuance, prompting investors to bet on alternatives in dollar-denominated assets.

The yield on 30-Treasuries fell seven basis points to move below 5%. The dollar rose 0.3%, setting the currency on track for its biggest gain in more than two weeks. S&P 500 futures strengthened 1.3%.

Bloomberg News reported Tuesday that Japan’s finance ministry asked market participants for their views on the appropriate amount of debt issuance. The move suggested it is looking to bring calm to a market where relentless selling had pushed yields to record highs and left demand for fresh supply floundering.

“That potential lower issuance is giving Treasuries a nice helping hand,” said Michael Brown, strategist at Pepperstone Group in London. “For those seeking to buy long-term debt, lower Japanese government-bond supply could force them into the Treasury complex.”

The yield on Japan’s 40-year debt fell about 25 basis points. Bonds roses across Europe as well, where weaker-than-expected French inflation offered an additional boost. European equities climbed 0.2%.

US Treasuries have come under pressure in recent weeks as President Donald Trump’s signature tax legislation and a Moody’s Ratings downgrade put the spotlight on rising debt issuance and a ballooning budget deficit. The dollar has also been hit as shifting US policies and the global trade war weighed on demand for American assets.

The unpredictabililty of Trump’s tariff moves will continue to weigh on the greenback, said Kenneth Broux, a strategist at Societe Generale. The dollar has declined more than 7% this year against a basket of currencies, despite Tuesday’s gains.

“When you see these patterns of escalation, de-escalation, sleep, repeat, it’s not going to give investors a lot of confidence about what the administration is trying to do,” Broux said. “There’s still the conversations about the re-balancing from US assets. That’s a multi-week, multi-month process.”

US stocks are set to bounce back after the US long weekend as Trump postponed his June-deadline for 50% tariffs on imports from the European Union, with trade talks between the parties continuing. 

Among early movers, Trump Media & Technology Group rose 11% after a report said that the company plans to raise $2 billion in equity and $1 billion via convertible bonds to buy cryptocurrencies. United States Steel Corp. extended gains after rallying about 21% on Friday as Trump announced a partnership between the firm and Japan’s Nippon Steel Corp. 

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 1.6% as of 5:46 a.m. New York time
• Nasdaq 100 futures rose 1.8%
• Futures on the Dow Jones Industrial Average rose 1.3%
• The Stoxx Europe 600 rose 0.6%
• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%
• The euro fell 0.4% to $1.1347
• The British pound fell 0.2% to $1.3538
• The Japanese yen fell 0.8% to 144.02 per dollar

Cryptocurrencies

• Bitcoin rose 0.1% to $109,767.68
• Ether rose 2.9% to $2,642.45

Bonds

• The yield on 10-year Treasuries declined five basis points to 4.47%
• Germany’s 10-year yield declined two basis points to 2.54%
• Britain’s 10-year yield declined one basis point to 4.67%

Commodities

• West Texas Intermediate crude rose 0.4% to $61.77 a barrel
• Spot gold fell 1.4% to $3,296 an ounce

This story was produced with the assistance of Bloomberg Automation.

Copyright Bloomberg News