U.S. Yields Hold Near One-Year High; Stocks Mixed: Markets Wrap

(Bloomberg) -- Treasury yields held near their highest in a year and global stocks edged back on Wednesday from a record as investors assessed the impact of a bond selloff on other assets. The dollar strengthened.

The yield on benchmark 10-year Treasuries dipped to around 1.30% after touching the highest since February 2020. Bonds in Australia and New Zealand tumbled. Asian equities were mixed, though South Korea underperformed. S&P 500 futures were flat after the gauge closed slightly lower on Tuesday. European equity contracts edged lower.

Elsewhere, oil fluctuated around $60 a barrel in New York amid a deepening energy crisis in the U.S. that has crippled the petroleum industry. China remains shut for a week-long holiday and will reopen Thursday. Bitcoin traded just below the $50,000 level.

The so-called reflation trade is powering assets tied to economic growth and price rises, including commodities and cyclical stocks, and pushing bond yields higher. Investors are also riding a wave of speculative euphoria from penny stocks to Bitcoin amid abundant policy support. But some are questioning whether the jump in yields could eventually weigh on riskier assets.

Read More: Yield Surge Stirs Debate on Breaking Point for Everything-Rally

“The market is fairly frothy here from a sentiment perspective,” Liz Ann Sonders, chief investment strategist at Charles Schwab & Co., said on Bloomberg TV. “You have to put a move higher in yields that goes out of the comfort zone as a potential risk associated with that.”

A 10% pullback in U.S. shares is plausible given “ebullient sentiment readings, stretched valuation levels and slipping earnings revision momentum,” according to Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist.

Here’s a look at how it’s playing out in global markets:

Bonds

The Treasury 30-year yield dipped to 2.08%. Australia’s 10-year yield climbed eight basis points to 1.40%.

Stocks

S&P 500 futures were little changed after the gauge dropped 0.1% on Tuesday, paring this year’s advance to 4.7%. Japan’s Topix index fell 0.2%, while the Hang Seng Index in Hong Kong outperformed, up 1%.

Currencies

The dollar strengthened against most of its major peers. The kiwi saw the brunt of G-10 losses against the greenback. The offshore yuan dipped 0.2%. The yen rose 0.2% to 105.88 per dollar.

Commodities

Brent oil fell after reaching a near 13-month high in the wake of freezing temperatures that crippled the Texas power system and disrupted crude production. Nearly 5 million people across the U.S were plunged into darkness as homes and businesses lost power. In metals, copper remained near the highest since 2012. Gold slipped below $1,800 an ounce.

Here are some key events coming up:

• Earnings roll on with companies including, Daimler, Credit Suisse, Deere, Danone and Nestle.
• Federal Open Market Committee minutes from the January meeting are due Wednesday.
• U.S. retail sales figures come on Wednesday.

©2021 Bloomberg L.P.