US stock futures advance, Japan yields top 2014 high

BLOOMBERG

US stocks futures rallied after strong earnings from Intel Corp, while Asian bonds retreated after Japan surprised investors by loosening its control of market rates.
Contracts on the Nasdaq 100 rose as much as 0.8%, with Intel surging 8% in premarket trading as the chipmaker gave a bullish revenue forecast. Advanced Micro Devices Inc and Nvidia Corp added more than 1%. Roku Inc, the video-streaming platform, jumped 9% on higher-than-expected profit.
In bond markets, all of the focus was on the Bank of Japan, the only major central bank not to have begun reversing ultra-easy monetary policy.  Having previously capped bond yields at 0.5% in a bid to stoke borrowing and its economy, the central bank said today it now regarded that level as a reference point rather than a rigid limit.
The move sent Japan’s 10-year yield to the highest level since 2014, amid speculation it marked the first step towards the end of extraordinary stimulus after the recent surge in inflation. In Australia, the corresponding rate rose 14 basis points.
While US and European yields jumped immediately after the BOJ’s announcement, the moves faded during the trading day on Friday. Ten-year Treasuries traded near the 4% mark hit yesterday, when Nikkei reported that the BOJ was set to tweak its yield policy. The BOJ announcement comes at the end of a week that’s seen investors grow increasingly bullish on the belief that the central banks are near the end of hiking interest rates. Robust economic figures have also hinted at a soft landing for the US economy and on Friday, Germany said it had exited a recession in the second quarter.
“Stock markets are justified in moving higher as more and more people now want to buy the dip,” said Peter Kinsella, head of currency strategy at asset manager Union Bancaire Privee UBP SA.
Company earnings have also surprised to the upside as the busiest week of this season’s results calendar draws to a close. Hermes International rose 3.8% in Paris after reporting robust sales for its high-end handbags. Standard Chartered Plc jumped 5% after announcing a $1 billion stock buyback.
Investors will await the US PCE deflator, the Fed’s favored inflation gauges, to see if price growth is continuing to slow. The core measure is forecast to show an annualized 4.2% rate in June, versus the previous month’s 4.6%.
In Japan, 10-year yields jumped 13.5 basis points to 0.575%, above the BOJ’s earlier cap of 0.5%. The yen rose 1% against the dollar, but later ceded most of the advance. It’s still headed for its best month since March, with gains of almost 3.5%.