Bonds Rise on Rate Bets; Gold Dips Below $5,000: Markets Wrap

(Bloomberg) — Bonds and equities gained after benign US inflation data reinforced expectations that the Federal Reserve will cut interest rates this year. Trading volumes were thin with the US and China shut for public holidays.

Government bonds in Germany and the UK edged higher and Treasury futures were steady as traders continued to fully price in a Fed cut in July and a strong likelihood of a move in June. US inflation data lifted Treasuries on Friday, with the 10-year and the policy-sensitive two-year yields dropping five basis points.

European stocks rose 0.2%, with banking shares leading the gains. Futures on the S&P 500 added 0.3%. Asian equities were flat at the start of a week marked by Lunar New Year holidays, with mainland China closed. With the US observing the Presidents’ Day holiday, there will be no cash Treasury trading on Monday.

A measure of stability has returned to markets after the S&P 500 posted back-to-back weekly losses, driven by uncertainty over the disruptive impact of AI on businesses. Some of that pressure eased after data on Friday showed the US consumer price index rose 0.2% in January, the smallest gain since July, and traders priced in higher chances that the Fed will ease.

“Overall, this won’t change Fed policy, but it will ease the path towards a cut in rates sooner rather than later,” said Neil Birrell at Premier Miton Investors.

That backdrop is raising the focus on reports this week — such as ADP private payrolls data Tuesday and the minutes from the Fed’s January meeting on Wednesday. Investors are eager for a fresh read on the economy and how policymakers are assessing the balance between employment and inflation.

What Bloomberg strategists say…

Global equities are likely to retreat as the fracturing AI outlook drags down megatechs and sectors vulnerable to disruptions. Stock declines will help bonds extend their rallies.

— Garfield Reynolds, MLIV Team Leader. For full analysis, click here.

Elsewhere, Gold dipped below $5,000 an ounce, as traders booked profits from a gain in the previous session. Silver fell 1%.

The dollar was steady, while Bitcoin traded around $68,300 after swinging over the weekend. Oil was little changed as traders monitored geopolitical risk before talks between the US and Iran are expected to resume on Tuesday.

Corporate Highlights:

Warner Bros Discovery Inc. is considering reopening sale talks with rival Hollywood studio Paramount Skydance Corp. after receiving its hostile suitor’s most recent amended offer, people with knowledge of the matter said. Volkswagen plans to cut costs by 20% by the end of 2028, Manager Magazin reported, without saying where it got the information. A group led by Macquarie Asset Management will buy Qube Holdings Ltd. in a deal worth around A$11.7 billion ($8.3 billion). Some of the main moves in markets:

Stocks

The Stoxx Europe 600 rose 0.2% as of 8:34 a.m. London time S&P 500 futures rose 0.3% Nasdaq 100 futures rose 0.3% Futures on the Dow Jones Industrial Average rose 0.3% The MSCI Asia Pacific Index was little changed The MSCI Emerging Markets Index rose 0.4% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1863 The Japanese yen fell 0.4% to 153.38 per dollar The offshore yuan rose 0.2% to 6.8854 per dollar The British pound was little changed at $1.3647 Cryptocurrencies

Bitcoin fell 0.2% to $68,657.41 Ether rose 0.8% to $1,972.98 Bonds

The yield on 10-year Treasuries was little changed at 4.05% Germany’s 10-year yield declined one basis point to 2.75% Britain’s 10-year yield declined one basis point to 4.40% Commodities

Brent crude fell 0.2% to $67.59 a barrel Spot gold fell 0.7% to $5,007.23 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Richard Henderson.

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