Dollar Nears One-Month High, Yields Rise: Markets Wrap

(Bloomberg) — The US dollar climbed toward a one-month high as Treasury yields rose and Asia equities declined after hawkish European Central Bank comments pushed back against bets on early and extensive rate cuts.

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The MSCI Asia Pacific Index slid 1.2%, the first decline in four sessions, with Hang Seng Index set for the worst day in three months as property-sector funding plans hurt bank shares. European stock-index futures fell, extending a decline in the prior session, while US futures also traded in the red.

Gold headed lower, with Treasuries declining across the curve in the first trading day since Friday. 10-year yields and the policy-sensitive 2-year debt advanced around six basis points each. Traders now look to Federal Reserve Governor Christopher Waller’s speech later Tuesday on whether there will be more push back against wagers of a rate cut in March.

“It’s probably too soon to position for the next leg down move in yields just yet,” said Amy Xie Patrick, head of income strategies at Pendal Group. Over the longer term, say six months or more, she is confident yields are headed lower, but the immediate outlook is less certain.

ECB Governing Council member Robert Holzmann indicated cuts this year were not assured given lingering inflation and geopolitical risks, in Monday comments. The sentiments echo prior comments from ECB President Christine Lagarde warning that it’s too early to talk about trimming borrowing costs.

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Oil prices were steady as continued Houthi attacks on ships in the Red Sea that are keeping tensions high in the Middle East were offset by a shaky global economic outlook and gains in the dollar. Global benchmark Brent held above $78 a barrel, while West Texas Intermediate traded below $73.

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“We are seeing consolidation across Asia markets as the potential escalation in geopolitical conflicts in the Red Sea is driving EM risk-off…