Asia Stocks to Drop on Virus Spike; Gold Rallies: Markets Wrap

(Bloomberg) -- Asian stocks are set to decline amid concern that a surge in global coronavirus cases could crimp the economic recovery, with traders also bracing for key runoff elections in the U.S. Gold maintained a rally.

Australian shares fell in early trading Tuesday, while futures indicated equities in Japan and Hong Kong will also open lower. S&P 500 contracts fluctuated after the benchmark suffered its worst decline to start a year since 2016. The Cboe Volatility Index -- a gauge of expected price swings for the S&P 500 known as the VIX -- surged the most since October. The dollar and Treasuries were steady. The pound held losses after England entered its third lockdown.

Elsewhere, oil sank as OPEC+ talks were unexpectedly suspended on Monday after a majority of members, including Saudi Arabia, opposed Russia’s proposal for a February supply hike. Bitcoin’s rally fizzled out as the famously volatile cryptocurrency sank as much as 17%.

Tuesday’s runoff elections in Georgia, which could determine whether Democrats have control of Congress to push President-elect Joe Biden’s agenda, is weighing on market sentiment. Meanwhile, global coronavirus infections topped 85 million. Daily cases in the U.S. jumped to a record of nearly 300,000 following the New Year holiday, and an easier-to-spread variant could intensify the surge.

“Equity markets will remain sensitive to developments tied to the pandemic that have held the U.S. and global economy hostage for nearly a year,” John Stoltzfus, chief investment strategist at Oppenheimer, wrote in a note. “Should the Democrats win both seats, we expect the S&P 500 to become vulnerable to a downdraft in the neighborhood of 6% to 10%” from the end of 2020, he added.

Markets are also watching the 10-year breakeven rate for Treasuries, which shows traders see U.S. inflation averaging at least 2% per year over the coming decade -- the first time expectations have climbed that high since 2018.

What to watch this week:

• On Tuesday, the state of Georgia holds a run-off election for two U.S. Senate seats that will decide control of the chamber.
• U.S. Congress meets to count electoral votes and declare the winner of the 2020 Presidential election Wednesday.
• FOMC minutes out Wednesday.
• U.S. unemployment report for December is due Friday.

These are some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.1% as of 8:23 a.m. in Tokyo. The S&P 500 decreased 1.5%.
• Nikkei 225 futures fell 0.8%.
• Australia’s S&P/ASX 200 Index dropped 0.4%.
• Hong Kong’s Hang Seng Index futures fell 1.2%.

Currencies

• The yen was at 103.12 per dollar.
• The offshore yuan traded at 6.4538 per dollar.
• The Bloomberg Dollar Spot Index was little changed on Monday.
• The euro was at $1.2251.
• The pound traded at $1.3572.

Bonds

• The yield on 10-year Treasuries was steady at 0.91% on Monday.
• Australia’s 10-year bond yield fell five basis points to 0.97%.

Commodities

• West Texas Intermediate crude fell 0.5% to $47.38 a barrel.
• Gold was at $1,941.81 an ounce after dropping 2.3%.

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