Traders also are betting that the Fed will cut rates in the
second half to ward off an economic downturn, but the two-year
Treasury note's 4% rate and what will likely be a 5% Fed target
rate is a "huge discrepancy" that cannot continue, LaVorgna
said.
Minutes of the Fed's policy meeting in March are also
scheduled to be released on Wednesday.
Trading was light as markets were closed in Europe,
Australia and Hong Kong for Easter.
The dollar index rose 0.52% and the two-year Treasury yield, which typically moves in step with
interest rate expectations, added 4.2 basis points to 4.014%.
On Wall Street, the Dow Jones Industrial Average rose
0.3%, the S&P 500 gained 0.10% and the Nasdaq Composite dropped 0.03%. MSCI's gauge of stocks across the globe closed down 0.11%.
The dollar extended gains against the yen to 133.87 , the highest since March 15, on receding expectations
of a near-term tweak to Japan's ultra-loose monetary policy.
Japan's new central bank Governor Kazuo Ueda said it was
appropriate to maintain the bank's policy for now as inflation
has yet to hit 2% as a trend, suggesting he will be in no rush
to dial back its massive stimulus.
The yen was weakened 1.08% at 133.57 per dollar.
Asian shares were little changed. MSCI's broadest index of
Asia-Pacific shares outside Japan gained 0.04%.
In China, shares slipped, with the blue chip CSI300 Index 0.32% lower and the Shanghai Composite Index easing 0.16% on rising geopolitical tensions around the Taiwan
Strait.
China announced three days of drills on Saturday, after
Taiwan's President Tsai Ing-wen returned to Taipei following a
meeting in Los Angeles with U.S. House of Representatives
Speaker Kevin McCarthy.
U.S. gold futures settled down 1.1% at $1,989.10 an
ounce.
U.S. crude fell 96 cents to settle at $79.74 a barrel
and Brent settled down 94 cents at $84.18 a barrel.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World FX rates YTD Global asset performance Asian stock markets ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Ankur Banerjee; Editing by Kirsten Donovan, Will
Dunham and Richard Chang)
(Adds closing MSCI index)
By Herbert Lash
NEW YORK, April 10 (Reuters) - U.S. stocks closed mostly
flat and the dollar rose on Monday after strong jobs data last
week pointed to the Federal Reserve hiking interest rates in
May, while the yen eased after Japan's new central bank governor
vowed to maintain ultra-loose policy.
Gold prices slipped below the key $2,000 level due to a
resurgent dollar, while Treasury yields edged higher on growing
market expectations that the Fed will hike rates when
policymakers conclude a two-day meeting on May 3.
Consumer price index data on Wednesday will encourage the
market to see a rate hike next month, but more important reports
on Thursday and Friday will show the extent of emergency funding
for banks, said Marc Chandler, chief market strategist at
Bannockburn Global Forex in New York.
"My sense is that the labor market and CPI would favor the
Fed raising rates again. However, what has made the market have
second thoughts is the extent of the tightening of lending."
"We saw in the last two weeks there's a record decline in
commercial and industry loans," Chandler said.
Futures show a 71.7% likelihood that the Fed will raise
rates by 25 basis points to a range of 5.0%-5.25% next month,
CME Group's FedWatch tool shows.
But recession worries have risen as commercial lending fell
after the sudden collapse of Silicon Valley Bank in March
tightened credit conditions among U.S. banks. The Fed's
emergency lending program has eased some of those concerns.
Fed lending to banks over the past four weeks has increased
more than $400 billion and offset nearly two-thirds of the
quantitative tightening that began a year ago, said Joe
LaVorgna, chief U.S. economist at SMBC Nikko Securities in New
York.
"To the extent the market has all this liquidity sloshing
around, people get more confident that the Fed is going to be
there to save us in some capacity," LaVorgna said. "The market
is going to stay bid, it won't go down."
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