Asia Stocks, U.S. Futures Dip as Bond Yields Climb: Markets Wrap

(Bloomberg) — Asian stocks and U.S. futures dipped Wednesday as Treasury yields extended an advance amid a surge in energy costs that threatens to stoke inflationary pressures. The dollar ticked higher.

Most Read from Bloomberg

Christmas at Risk as Supply Chain ‘Disaster’ Only Gets Worse
Reshaped by Crisis, an ‘Anti-Biennial’ Reimagines Chicago
This Is What Europe’s Green Future Looks Like
Ghana’s Record Cocoa Harvest Is Bittersweet for Export Industry

MSCI Inc.’s Asia-Pacific index slid for a fourth session, including retreats in Japan and Hong Kong, contrasting with an overnight Wall Street rebound spurred by bargain-hunting in beaten-down technology stocks. S&P 500, Nasdaq 100 and European equity futures all declined.

The 10-year Treasury yield climbed to 1.55% and the 30-year yield reached the highest since June. Faster-than-expected U.S. service-sector activity and price pressures from spiraling costs for crude oil and natural gas are adding to the case for a reduction in Federal Reserve bond-buying.

Traders are awaiting jobs data this week for more clues about the Fed policy outlook. In New Zealand, the central bank raised interest rates for the first time in seven years and signaled more tightening, whipsawing the currency.

Volatility has picked up in global markets as investors brace for a slower but still robust economic recovery from the pandemic and gradual monetary-policy tightening to contain the cost of living. U.S. political gridlock over the nation’s debt ceiling and President Joe Biden’s wider economic agenda is contributing to the uncertainty.

“For the last five or six months we’ve entered a period of kind of a mini-cycle in the U.S. where you’ve got a changing Fed regime, and we are at the extended end of a recovery,” Kieran Calder, Union Bancaire Privee Head of Equity Research for Asia, said on Bloomberg Television. “It leaves the market vulnerable to external shocks and increased volatility.”

Read: Stock Traders Rethink Their Own Moves at Fastest Rate in Year

Story continues

The 10-year U.S. breakeven rate — a proxy for where investors see annual inflation over the next decade — has climbed to the highest since June. Prolonged supply chain disruptions and jumping raw-material prices are feeding into worries about rising costs.

“Right now you’re seeing inflation risk really start to percolate and I do think that you’re going to see that really eat into margins as we go through the fourth quarter into 2022,” Erin Browne, multi-asset portfolio manager at Pimco, said on Bloomberg Television. “The energy crisis that’s starting to loom in Europe is a real risk that is being underestimated by the market right now.”

Meanwhile, crude oil steadied near a seven-year high and Bitcoin held a climb past the $51,000 mark. Elsewhere, concerns about China’s highly-leveraged property sector continue to weigh on sentiment. The nation’s markets are closed for a holiday and reopen Friday.

For more market analysis, read our MLIV blog.

Here are some events to watch this week:

Reserve Bank of India monetary policy decision on Friday
The U.S. Labor Department releases unemployment and job creation data Friday

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.5% as of 11:49 a.m. in Tokyo. The S&P 500 rose 1.1%
Nasdaq 100 futures declined 0.6%. The Nasdaq 100 rose 1.4%
Japan’s Topix index declined 0.3%
Australia’s S&P/ASX 200 Index shed 0.6%
South Korea’s Kospi index fell 1.3%
Hong Kong’s Hang Seng Index fell 1%

Currencies

The Japanese yen traded at 111.60 per dollar, down 0.1%
The offshore yuan was at 6.4499 per dollar
The Bloomberg Dollar Spot Index added 0.1%
The euro was at $1.1592

Bonds

The yield on 10-year Treasuries advanced about two basis points to 1.55%
Australia’s 10-year bond yield climbed about five basis points to 1.57%

Commodities

West Texas Intermediate crude was at $78.77 a barrel, down 0.2%
Gold was at $1,755.31 an ounce, down 0.3%