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Futures subdued after BOJ’s policy surprise

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U.S. stock index futures came under pressure on Tuesday after the Bank of Japan surprised global investors with a policy shift that would allow long-term interest rates to rise more.

The BOJ decided to allow the 10-year bond yield to move 50 basis points either side of its 0% target, bigger than the previous 25 basis point band, against expectations of no change at its policy meeting.

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Wall Street’s main indexes continued their losing streak for a fourth straight session on Monday as investors shied away from riskier bets, worried that the Federal Reserve’s interest rate hikes could push the U.S. economy into recession.

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“While other central bankers attempt to cool down super-hot inflation via spikes in interest rates, in Japan policymakers have been trying to fire it up, by prolonging the era of cheap money,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“The decision is being read as a sign of testing the water, for a potential withdrawal of the stimulus which has been pumped into the economy to try and prod demand and wake up prices.”

Treasuries fell following BoJ’s shock move, with benchmark 10-year Treasury yield rising more than 8 basis points to a three-week high of 3.6676%. Thirty-year yields were last up 11 bps at 3.7179%.

Money market participants see a 65.2% chance the Fed will hike its key benchmark rate by 25 basis points in February to 4.50%-4.75%, keeping the terminal rate at 4.878% by May 2023.

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Investors will closely monitor housing starts data, due at 8:30 a.m. ET, which is expected to show a marginal decline in the number of new residential buildings that began construction in November at 1.4 million as against 1.425 million in October.

A slew of other economic data due this week including consumer confidence, existing home sales and core inflation will provide more clues to investors on future interest rate hikes.

At 6:44 a.m. ET, Dow e-minis were up 41 points, or 0.12%, S&P 500 e-minis were up 0.25 points, or 0.01%, and Nasdaq 100 e-minis were down 14.25 points, or 0.13%.

Lucid Group Inc rose 4.7% in premarket trading after the electric vehicle maker closed a $1.5 billion capital raise that the firm said would boost its liquidity.

Nike Inc added 0.4% ahead of its quarterly report due after the bell. (Reporting by Shubham Batra in Bengaluru; Editing by Maju Samuel)



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