Yields in Focus as Stocks Set to Open Cautiously: Markets Wrap

Andreea Papuc and Emily Barrett
·2 min read

(Bloomberg) -- Stocks are set to open cautiously in Asia Monday as traders keep a close eye on bond yields after last week’s turmoil. Currencies were steady.

Equity futures were little changed in Japan and Australia. U.S. tech stocks staged a modest rebound on the last day of a tumultuous week as a global bond rout eased Friday, sending the yield on 10-year Treasuries tumbling below 1.5%. The S&P 500 Index fell.

Global bonds stabilized after central banks from Asia to Europe moved to calm a panic that had sent U.S. government bond yields to their highest level in a year and spurred a selloff in stock markets.

Investors are getting increasingly worried that accelerating inflation could trigger a pullback in monetary policy support despite assurances from Federal Reserve Chairman Jerome Powell that higher Treasury yields reflect optimism about the outlook for growth. Fed officials have stressed that the central bank has no plans to tighten policy given lingering weakness in the labor market.

“At current levels, we believe U.S. rates pricing will start to unnerve the Fed, despite its recent proclamations that it is comfortable with the rise in yields,” Eric Robertsen, chief strategist at Standard Chartered Bank, said in a note.

Over the weekend, the U.S. House of Representatives passed President Joe Biden’s $1.9 trillion Covid-19 aid package. The bill heads to the Senate, where Biden will need to woo Republican support or avoid losing a single Democratic vote.

Read: Traders on Yield Watch in Bond Markets ‘Not for Faint-Hearted’

Meanwhile, China’s economic recovery slowed in February as factories shut during the Lunar New Year holidays and virus restrictions dampened what’s usually a busy travel season.

Bitcoin fell below $45,000.

There are some key events to watch this week:

Caixin China manufacturing PMI is due Monday.Reserve Bank of Australia sets monetary policy Tuesday.U.S. Federal Reserve Beige Book is due Wednesday.OPEC+ meeting on output Thursday.The February U.S. employment report on Friday will provide an update on the speed and direction of the nation’s labor market recovery.

These are some of the main moves in markets:

Stocks

The S&P 500 Index fell 0.5%.Nikkei 225 futures were little changed.Australia’s S&P/ASX 200 Index rose 0.4%.Hong Kong’s Hang Seng Index was little changed earlier.

Currencies

The yen traded at 106.57 per dollar.The Bloomberg Dollar Spot Index rose 0.7% Friday.The euro was at $1.2071.

Bonds

The yield on 10-year Treasuries tumbled 12 basis points to 1.40%.

Commodities

West Texas Intermediate crude fell 3.2% to $61.50 a barrel.Gold fell 2.1% to $1,734.04 an ounce.

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©2021 Bloomberg L.P.

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