Asia Stocks to Start Week Higher; Bonds Decline: Markets Wrap

(Bloomberg) — Asia stocks are poised to start the week higher as investors weigh solid corporate earnings against concerns about inflation and the economic recovery.

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Futures rose in Japan and Hong Kong. Australia ticked higher at the open, while U.S. contracts fluctuated. Wall Street stocks advanced on Friday, with the S&P 500 chalking its best week since July as earnings buoyed sentiment.

Bond yields in New Zealand and the kiwi dollar gained after New Zealand’s inflation accelerated to the fastest pace in 10 years. Yields on Australia’s three-year bond surged more than 10 basis points. Treasury yields climbed on Friday. The dollar was steady.

China’s third-quarter gross domestic product due Monday along with monthly industrial and investment data will be closely watched to gauge the severity of electricity shortages. Meanwhile, People’s Bank of China Governor Yi Gang said authorities can contain risks posed to the Chinese economy and financial system from the struggles of China Evergrande Group.

Energy prices extended their advance with crude oil rising above $83 a barrel to the highest since 2014. Brent topped $85 a barrel, the highest since 2018. Bitcoin pushed above $61,000 as the first U.S. Bitcoin futures ETF may debut Monday.

Despite the risk-on tone, investors continue to grapple with worries about inflation amid surging energy shortages that are prompting more production cuts. At the same time, the economic recovery remains patchy while central bankers are inching closer to paring back stimulus. U.S. consumer sentiment fell unexpectedly in early October, but retail sales advanced.

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“Sentiment really got quite bearish,” Kyle Rodda, market analyst at IG Group, said on Bloomberg Television. “Markets are feeling reasonably emboldened by the fact that we are probably going to see some reasonably robust results from U.S. corporates this quarter. But the longer term issue remains what is happening with the global supply shock brought upon by the pandemic, the inflation pressure that’s coming about from that, and the very fine line that the Fed is walking to try and tamp down these inflation risks, while at the same time not stepping on the recovery or undermining financial market strength.”

Bank of England Governor Andrew Bailey said the central bank will “have to act” to curb inflationary forces and warning higher energy costs mean price pressures will linger. Mohammed El-Erian, the chief economic adviser at Allianz SE and a Bloomberg columnist, said investors should prepare for increased market volatility if the Federal Reserve pulls back on stimulus measures set in motion by the Covid-19 pandemic.

Among U.S. earnings, Goldman Sachs Group Inc., Charles Schwab Corp. and Alcoa Corp. reported positive results.

For more market analysis, read our MLIV blog.

Events to watch this week:

Earnings roll in, including from AT&T Inc., Barclays Plc, Johnson & Johnson, Netflix Inc. and Tesla Inc.
China releases retail sales, industrial production, GDP data, Monday
Bank Indonesia rate decision and briefing, Tuesday
China’s NPC Standing Committee starts a meeting Tuesday that goes on through Oct. 23. A review of anti-monopoly regulations is on the agenda
U.S. housing starts, Tuesday
EIA crude oil inventory report, Wednesday
China property prices, loan prime rates, Wednesday
U.S. Conference Board leading index, U.S. existing home sales, jobless claims, Thursday
Fed Chair Jerome Powell takes part in policy panel discussion, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.1% as of 8:10 a.m. in Tokyo. The S&P 500 rose 0.8%
Nasdaq 100 futures slid 0.1%. The Nasdaq 100 rose 0.6%
Nikkei 225 futures added 0.3%
S&P/ASX 200 Index gained 0.3%
Hang Seng Index futures climbed 0.6% earlier

Currencies

The Japanese yen was at 114.33 per dollar, down 0.1%
The offshore yuan was at 6.4344 per dollar
The Bloomberg Dollar Spot Index was flat
The euro was at $1.1598

Bonds

The yield on 10-year Treasuries advanced six basis points to 1.57%
Australia’s 10-year government bond yield jumped about six basis points to 1.71%

Commodities

West Texas Intermediate crude rose 0.9% to $83.02 a barrel
Gold was at $1,770.05 an ounce, up 0.1%