Stocks and Bonds Churn as BOJ Rattles Traders: Markets Wrap

(Bloomberg) — Stock and bond markets fluctuated, while the yen surged the most in three months amid renewed speculation that the Bank of Japan will soon scrap the world’s last negative interest-rate regime.

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S&P 500 futures were little changed and 10-year Treasury yields added three basis points. The yen strengthened 1.6% against the dollar and Japanese bonds sold off sharply, with the rate on the 10-year note jumping 11 basis points.

The move was another jolt to the global government rally, raising further doubts that central banks are ready to pivot toward rate cuts. In Japan, comments from BOJ Governor Kazuo Ueda on more challenging policy ahead caused traders to shift interest-rate bets, with overnight-indexed swaps at one point on Thursday showing an almost 45% chance that the BOJ would end its negative interest rates policy at this month’s meeting.

Traders also pointed to the fact that markets have run up in recent weeks and are due for a pause. There was also a sense of caution ahead US labor market data, including jobless claims today and non-farm payrolls on Friday.

“Both valuation and positioning would argue for exhaustion in the recent bond rally,” said Mohit Kumar, chief European economist at Jefferies International. “Given our view of only a mild recession and inflation still remaining sticky, we would argue that the market has run a bit ahead of itself.”

Read More: Wrong Six Straight Times, Traders Bet Big Again on Fed Rate Cuts

Among individual stocks, Chewy Inc. dropped 11% in US premarket trading after the online pet supplies retailer cut its sales guidance. Advanced Micro Devices Inc. rose after unveiling new so-called accelerator chips aimed at taking on the lucrative artificial intelligence market.

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In other markets, gold climbed and the dollar weakened. Bitcoin slipped below $44,000.

The Swiss franc rose to the strongest level against the euro since the Swiss National Bank abandoned its currency cap…