(Bloomberg) — Asian stocks slid Monday after traders soured on the reflation trade in the wake of a hawkish pivot by the Federal Reserve. A gauge of the dollar was steady.

Equities fell in Japan, Australia and South Korea. The Nikkei 225 dropped as much as 3%, the biggest slide in more than a month. U.S. futures slipped after the S&P 500 retreated Friday, when commodities such as copper dropped and the dollar touched a two-month high on the prospect of less accommodative U.S. monetary policy.

The flattening of the Treasury yield curve was another illustration of the retreat in reflation bets. The 10-year yield declined to 1.42% and the 30-year rate dipped below 2%. Short-maturity yields surged after Fed official James Bullard said inflation risks may warrant higher interest rates next year, an earlier liftoff than penciled in by many of his colleagues.

Gold stabilized after slumping last week. Oil climbed to about $72 a barrel as talks between world powers and Iran dragged on, potentially delaying the return of the latter’s energy exports.

In a light week for economic data, traders will be paying close attention to appearances by Fed policy makers, including Chair Jerome Powell, for any guidance on the winding back of stimulus. In his comments, Bullard also said that the central bank has started discussing tapering asset purchases.

“The shift toward tapering and a pull forward in first rate hikes may cause bouts of nervousness in markets with shares vulnerable to a decent correction,” Shane Oliver, head of investment strategy at AMP Capital, wrote in a note. “But note that tapering is not monetary tightening (it’s just slower easing) and rate hikes are still a fair way off in most developed countries.”

For more market commentary, follow the MLIV blog.

Here are some events to watch this week:

St. Louis Fed President James Bullard, Dallas Fed President Robert Kaplan and New York Fed President John Williams are among Fed speaker throughout the weekEuropean Central Bank President Christine Lagarde addresses the European Parliament MondayFed Chair Jerome Powell testifies at a House Subcommittee hearing on the Fed’s pandemic emergency lending and its asset purchase programs TuesdayBank of England interest rate decision Thursday

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These are some of the main moves in financial markets:


S&P 500 futures slipped 0.2% as of 9:46 a.m. in Tokyo. The gauge fell 1.3% FridayNasdaq 100 futures were 0.1% lower. The index fell 0.8%Japan’s Topix index fell 2.4%Australia’s S&P/ASX 200 Index dropped 1.7%South Korea’s Kospi index fell 0.6%


The yen was little changed at 110.16 per dollarThe offshore yuan traded at 6.4558 per dollar, up 0.1%The Bloomberg Dollar Spot Index was steady after rising 0.4% FridayThe euro was at $1.1874


The yield on 10-year Treasuries dipped to 1.42%Australia’s 10-year yield fell six basis points to 1.54%


West Texas Intermediate crude rose 0.4% to $71.93 a barrelGold rose 0.5% to $1,772.18 an ounce

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