Stock Selloff Hits Asia as Bond Yields Steady: Markets Wrap

Stock Selloff Hits Asia as Bond Yields Steady: Markets Wrap
Andreea Papuc and Emily Barrett
·3 min read

(Bloomberg) -- Asian stocks fell with U.S. futures Thursday after an overnight surge in bond yields once more dragged down shares on Wall Street. Treasuries steadied and the dollar strengthened.

Stocks dropped in Japan, South Korea and Australia, while S&P 500 futures saw modest declines. Hong Kong and China opened lower. Earlier, the Nasdaq 100 slumped to a two-month low and the S&P 500 extended its slide into a second day. A selloff in high-flying giants such as Apple Inc. and Amazon.com Inc. outweighed gains in banks and energy producers.

Australian bonds slumped after benchmark Treasury yields approached 1.5% on Thursday, and a market gauge of inflation expectations over the next five years hit its highest level since 2008. Traders also assessed data pointing to a slow and uneven economic recovery from the depths of the pandemic.

The selloff in Treasuries has rattled nerves across the globe amid warnings of excessive investor optimism in stocks. Policy makers still appear reluctant to step in to buy more longer-dated bonds, with focus turning to Federal Reserve Chairman Jerome Powell’s upcoming comments. Chicago Fed President Charles Evans said Wednesday he shared the view that the recent rise in yields was healthy.

“Inflation is a concern; there is a lot of money sloshing around the system and it makes sense to have some sort of a correction right now,” said Shana Sissel, Spotlight Asset Group chief investment officer. “And bond yields going up is the market’s implicit way of tightening since the Fed has made it clear they don’t have the intention of doing so.”

Read: U.S. Inflation Expectations Hit Decade High as Yields Resurge

Data Wednesday showed that growth at U.S. service providers slowed to a nine-month low in February. Meanwhile, the number of employees at U.S. businesses rose by less than expected, underscoring the jobs market’s struggle to recover despite a decline in Covid-19 infections in recent weeks.

The U.S. economy expanded modestly in the first two months of the year and sentiment among business owners is picking up as vaccinations bolster the prospects for growth, according to the Federal Reserve’s Beige Book. Democratic leaders in the Senate are working to consolidate support for the $1.9 trillion stimulus bill.

Elsewhere, oil fluctuated after a government report showing a record drop in domestic fuel inventories following a deep freeze that shuttered refineries in the U.S. South.

Some key events to watch this week:

OPEC+ meeting on output Thursday.U.S. factory orders, initial jobless claims and durable goods orders are due Thursday.Federal Reserve Chairman Jerome Powell speaks 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 moves in markets:

Stocks

S&P 500 futures fell 0.2% as of 10:56 a.m. in Tokyo. The S&P 500 fell 1.3%. The Nasdaq 100 lost 2.9%.Topix index fell 1%.Australia’s S&P/ASX 200 Index fell 0.8%.Kospi index fell 1.1%.Hang Seng Index fell 1.3%.Shanghai Composite was down 1%.

Currencies

The yen traded at 107.06 per dollar.The offshore yuan was at 6.4761 per dollar.The Bloomberg Dollar Spot Index was steady.The euro traded at $1.2056, down 0.1%.

Bonds

The yield on 10-year Treasuries was steady at 1.48% after rising nine basis points.Australia’s 10-year bond yield rose 11 basis points to 1.79%.

Commodities

West Texas Intermediate crude was steady at $61.34 a barrel.Gold rose 0.2% to $1,715 an ounce after sliding.

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2021 Bloomberg L.P.

Recommended Stories

  • GLOBAL MARKETS-Stocks edge down as investors hit pause, watch bond yields

    Global equity markets were little changed on Tuesday as Wall Street retreated and investors paused to gauge whether a bond yield jump had run its course, taking stock of gains from Monday's surge. "It was such a strong opening to the month yesterday that investors could be short-term focused and saying, 'Let's take some of the profits that we saw yesterday,'" said Sam Stovall, chief investment strategist at CFRA Research in New York. March began with a bang on Monday as global equities markets rose, the S&P 500 had its best day since June 5 and bond markets calmed after a month-long selloff.

  • Brazil Starts Debating New Covid Aid With Pandemic at Its Worst

    (Bloomberg) -- Brazil’s senate started discussing a $7 billion round of Covid aid for the poor as a new wave of the pandemic batters the economy and pushes the health system to the brink of collapse.The plan to revive last year’s cash handout program is part of a constitutional amendment that includes compensatory fiscal measures sought by Economy Minister Paulo Guedes to show the government remains committed to fiscal austerity after a record budget deficit in 2020.Discussions started on Wednesday afternoon in Brasilia and a vote is expected later tonight. As a constitutional amendment, it needs to be approved by a three-fifth majority in a two-round vote. If the bill passes the senate, it will move to the lower house.Some senators are piling pressure to boost the program and water down the austerity measures, however, fanning investors’ fear of a looming budget crisis. The very permanence of the economy minister in the administration has become a matter of concern should his proposals fail to pass.Adding urgency to the matter is a raging coronavirus crisis that is forcing governors and mayors to impose the harshest lockdowns yet across the country, with hospitals overrun with Covid-19 patients and deaths from the virus hitting daily records.Read More: Brazil’s Economic Rebound Slows as Aid Expires and Covid SpreadsThe government spent 322 billion reais ($56 billion) in 2020 on a more generous program that benefited over 60 million Brazilians with stipends of as much as 600 reais per month. This time, the plan is to support some 40 million citizens with four monthly payments of 250 reais at a cost of 40 billion reais.Austerity in CheckEven if only a fraction of the 2020 program, the new round of stimulus comes at moment when Latin America’s largest economy finds itself in a much tougher fiscal position, following a deficit of nearly 14% of GDP in 2020. Worried about the country’s budget outlook, investors started shunning long-dated government bonds and forcing the central bank’s hand to raise the benchmark interest rate by at least half a percentage point later this month.BRAZIL REACT: After 2020 Aid, Policy Gaffes Threaten 2021 GrowthLocal markets recovered part of their recent losses in the afternoon after lower house Speaker Arthur Lira tweeted that the proposal, known as emergency bill, is no threat to the government spending ceiling. The rule, which caps the growth of public expenditures to the rate of inflation, is considered by investors as the country’s last defense against runaway budget deficits.The real, which for most of the day lagged all major currencies, recovered after Lira’s tweet, and closed 0.7% higher versus the dollar. Stocks trimmed losses of more than 3.6% to close down just 0.3%.Yet the bill already lost some key austerity initiatives sought by Guedes. Gone are plans to end mandatory public spending on health and education, as well as a proposal to decrease the workload of public servants and their salaries in case of fiscal crisis.As it stands, it includes a trigger allowing the government to freeze salaries of public servants and reduce tax breaks, among other measures, whenever mandatory expenses exceed 95% of the budget.The biggest threat to Guedes’s austerity plan was a proposal backed by many senators to exclude the Bolsa Familia social program from the country’s spending ceiling.After a whole day of negotiations between Guedes and lawmakers, the economic team was able to block the idea of excluding Bolsa Familia from the cap. Instead, the agreement is to exclude 44 billion reais in expenditures from the fiscal rule in 2021 to pay for the new round of emergency aid.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • DraftKings Stock: Is It A Buy Right Now After Deal With Dish Network?

    DraftKings is one of the top IPO stocks to watch, as gambling legalization gains steam. Here is what the fundamentals and technical analysis say about buying DKNG stock now.

  • China ‘Worried’ About Bubbles in Property, Foreign Markets

    (Bloomberg) -- China’s top banking regulator said he’s “very worried” about risks emerging from bubbles in global financial markets and the nation’s property sector, sparking fresh concerns about further tightening in the world’s second-biggest economy. Stocks dropped across Asia.Bubbles in U.S. and European markets could burst because their rallies are heading in the opposite direction of their underlying economies and will have to face corrections “sooner or later,” Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission and Party secretary of the central bank said at a briefing in Beijing on Tuesday.READ MORE: Asian stocks slip as investors weigh impact of bond yields and China’s asset-bubble warningChina’s financial regulators are walking a fine line of trying to curb risks at home while limiting disruptions from abroad as the economy opens wider to foreign capital. The CBIRC vowed in January to stay “ahead of systemic risks,” after capping bank lending to the property market, slashing shadow banking activities and claiming victory in unwinding a wild expansion in peer-to-peer lending.“China’s monetary policy has not been as easy as the U.S. and Europe,” said Steven Leung, executive director at Uob Kay Hian (Hong Kong) Ltd. “This latest comment will create worry of further tightening.”Asia stocks tumbled and U.S. futures declined on Guo’s comments. The MSCI Asia Pacific Index erased earlier gains of as much as 0.8%. The CSI 300 Index in China fell as much as 1.4% and Hong Kong’s main gauge dropped almost 1%. Chinese government bonds gained from a shift toward haven assets, sending yields on benchmark 10-year notes to a nearly three-week low.“Beijing calling the overseas market rally a bubble won’t help sentiment in Hong Kong stocks, which had been seeing strong inflows from the mainland,” said Castor Pang, head of research at Core Pacific-Yamaichi.Regulators are watching capital inflows into China, where the economy is still growing and interest rates are higher, although the size and speed of such inflows remain controllable at the moment, Guo said.China’s top financial regulator also weighed in on the fintech sector, saying platforms that offer banking services must comply with the same capital requirements as traditional lenders to curb risks. The regulator has set different deadlines for each type of service, with the longest grace period of no more than two years, Guo said, without elaborating.Guo also said bubbles in China’s property market remain relatively big, with many people buying homes for investment or speculative purposes, which is “very dangerous.”A strong economic recovery, combined with a credit surge and a renewed fear of missing out have stoked buyer enthusiasm across China’s largest cities despite stricter curbs this year. Authorities have responded with a slew of policies to fine tune the industry, including a new mechanism on bank lending for real estate and fresh land-bidding rules designed to curb high-flying land costs.Still, home prices in the secondary market, which faces less government intervention, gained the most in 18 months in January, official data showed last week. Existing-home prices of certain popular projects in Shanghai surged more than 30% last year, according to China Real Estate Information Corp.“Guo’s comment reflects that Beijing wants a very stable financial market,” said Linus Yip, a strategist at First Shanghai Securities. “Stabilization is the ultimate goal of its monetary policy.”Other comments from Guo:China lending rates are likely to rebound this yearFinancial firms in Hong Kong not bound by U.S. sanctionsChina supports more Chinese firms listing in Hong KongReaction: Here’s What Analysts Are Saying on China’s Concern Over Bubbles(Updates with chart)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Market Wrap: Bitcoin Continues Choppy in High $40Ks Amid Market Indecision

    Bitcoin bulls struggle to pare the weekend's losses despite a strong start on Monday.

  • Rocket Falls as RBC Suggests Reddit-Driven Rally Is Overdone

    (Bloomberg) -- Rocket Cos. fell Wednesday, halting a three-day rally driven by sentiment that the home-loan provider was the latest retail-trader favorite for its high short interest.The stock fell 33% to $28.01, its steepest decline ever, after RBC Capital Markets downgraded its recommendation to sector perform from outperform, with a price target that suggests a 28% drop from Tuesday’s close. While mortgage demand is expected to continue to boost growth, that is now more than being captured in Rocket’s current valuation, analyst Daniel Perlin said in his report.Rocket hit an all-time high Tuesday after CNBC mentioned the company as a possible new target among traders discussing stocks on Reddit. The stock has more than doubled since it went public in August and now has a market capitalization of about $60 billion.“It seems heavy short interest in the stock was exposed, driving a jump at the open and the dam burst once heavy open interest in $30 call options were triggered, fueling another dealer gamma squeeze like we have seen with GameStop,” Neil Wilson, chief market analyst for Markets.com, said in emailed comments.Rocket carries 46% short interest as a percentage of float, according to S3 analytics. The analytics provider published a report Tuesday identifying exceptionally high trading and option volume for the Detroit-based company’s stock, alongside a large amount of short selling into the rally.“Evidence of this short squeeze can be shown by the fact that the price was able to drop just as quickly as it moved up, proving that the move was was likely due to artificial demand from short sellers having to buy the stock back once they received margin calls on their positions,” said Jake Wujastyk, chief market analyst at TrendSpider.Rocket’s jump may have been a matter of time, according to Bloomberg Intelligence analyst Ben Elliott. “Rocket has been a fringe meme stock for a while, so I figured something like this would happen eventually,” he said.The company’s fundamentals, however, don’t support the 16-17x price-to-forward earnings multiple implied by its March 2 close, Elliott said in a note. “Yet surprisingly resilient earnings may support a re-rating of the massive, tech-focused, nonbank lenders like Rocket and UWM if they keep performing amid rising rates.”Rocket’s gains, however, signal more than just Reddit mania. With a market value that’s worth more than some of its peers combined, the company has cemented itself as a heavyweight in the emerging mortgage tech sector following an August IPO that was bolstered by retail investors and housing market tailwinds.Its peers have also gained: Mr. Cooper Group Inc. is up 9.1% this year, while newly-listed loanDepot Inc. has surged 44% since it went public last month.(Updates share price moves throughout.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Biden’s Unnecessary Border Crisis

    His moves to undo Trump’s border policies are creating a migrant surge that risks running out of control.

  • Jobless claims preview: Another 750,000 Americans likely filed new unemployment claims

    The Department of Labor is set to release its weekly report on new jobless claims Thursday at 8:30 a.m.

  • Stock market news live updates: Stocks retreat after S&P 500's best session since June

    Stocks opened slightly higher Tuesday morning as the major indexes steadied after rallying a day earlier.

  • Why Wells Fargo Stock Soared in February

    Warren Buffett's Berkshire Hathaway sold off some of its stake in Wells Fargo (NYSE: WFC) in February, but that wasn't enough to derail the bank stock for the month. Wells Fargo has been in the regulatory penalty box for a few years now, the result of a series of scandals dating back to the mid-2010s involving the creation of millions of fraudulent saving and checking accounts. The bank is currently prohibited by the Federal Reserve from growing larger than its asset size at the end of 2017.

  • Yen near seven-month low, Asian shares fall as bond yields rise

    The Japanese yen hit a seven-month low on the dollar on Thursday as hopes that vaccine distribution and more government stimulus will drive the U.S. economy into a solid rebound lifted the greenback and benchmark Treasury yields. But the creep up in benchmark yields may weigh on Asian stocks, as wary investors recall last week's sell-off in government bonds that caused yields to spike, spooking equity markets and causing shares to tumble. U.S. shares had fallen overnight as investors sold off high-flying technology shares to focus on other sectors likely to benefit from an economic recovery.

  • Enbridge (ENB) Completes Cushing Asset Acquisition From Blueknight

    Enbridge (ENB) completes the acquisition of Blueknight assets in Cushing, OK, for $132 million.

  • S&P 500 Price Forecast – Stock Markets Hang On To Uptrend Line

    The S&P 500 went back and forth during the course of the trading session on Wednesday as we continue to see the uptrend line underneath offer support.

  • BitMEX’s Arthur Hayes Proposes Surrender to U.S. Authorities

    (Bloomberg) -- Arthur Hayes, the former chief executive of crypto exchange BitMEX who is wanted by the U.S. government, proposed to surrender to authorities in Hawaii on April 6, according to a court filing.Hayes is currently in Singapore, but has discussed surrendering in Hawaii and appearing remotely in a New York court, said Jessica Greenwood, assistant U.S. attorney in Manhattan, according to a transcript of a Feb. 9 hearing. She said arrangements are under discussion that would allow Hayes to live abroad and to travel to the U.S. for court appearances. If there’s a trial, Hayes would come to New York, Greenwood said.Hayes is among founders and executives of BitMEX who were charged last year with violations of the U.S. Secrecy Act “by willfully failing to establish, implement, and maintain an adequate anti-money laundering program” on the exchange.“In so doing, they allegedly allowed BitMEX to operate as a platform in the shadows of the financial markets,” the authorities said.Hayes, Benjamin Delo, Gregory Dwyer and Samuel Reed were charged in New York, where federal prosecutors claimed the exchange served American customers while flouting U.S. banking laws. Hayes said BitMEX was incorporated in the Seychelles because it could bribe authorities there for the cost of “just a coconut,” according to the indictment.Reed was arrested in Massachusetts last year, and federal authorities are still rounding up the remaining defendants.Since the case was made public, BitMEX has distanced itself from Hayes -- he stepped down, and the firm reshuffled its executive ranks and appointed a new CEO. Still BitMEX, which at one time was the world’s largest exchange for cryptocurrency derivatives, is no longer even in the top five, according to tracker Skew.Hayes didn’t return requests for comment. The office of the U.S. attorney for the Southern District of New York declined to comment.(Updates with no-comment in last paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • Why Rocket Companies stock surged on Tuesday

    Yahoo Finance's Jared Blikre joined Yahoo Finance Live to break down Rocket Companies surge.

  • Greece: Thousands spend night outdoors after powerful quake

    Fearful of returning to their homes, thousands of people in central Greece were spending the night outdoors late Wednesday after a powerful earthquake, felt across the region, damaged homes and public buildings. Officials reported structural damage, mainly to old houses and buildings that saw walls collapse or crack. One of them was a primary school, stone-built in 1938, in the quake-hit village of Damasi where 63 students were attending classes.

  • Dow Jones Futures: Why The Market Rally Is Only 'Mostly Dead'; Boeing Leads As Amazon, Zoom Break Long-Term Support

    The Nasdaq undercut lows while Amazon and stay-at-home winners like Zoom tumbled below 200-day lines. But the market rally isn't all dead yet.

  • Philadelphia Fed’s Harker: Don’t expect an interest rate hike ‘anytime in 2022’

    Philadelphia Fed President Patrick Harker joins Yahoo Finance's Brian Cheung to discuss the U.S. economic  outlook amid the COVID-19 pandemic.

  • Cathie Wood’s ARKK Sinks 20% From Peak as Tech Sells Off

    (Bloomberg) -- The main fund from Cathie Wood’s Ark Investment Management extended its drop from a February peak to 20%, highlighting a swift turnaround for the formerly high-flying stocks favored by the firm.The $24.6 billion Ark Innovation ETF (ARKK) tumbled 6.3% on Wednesday alone as growth stocks such as Pinterest Inc. and Zillow Group Inc. took a beating. The Nasdaq 100 Index lost almost 3% as traders turn away from tech in favor of so-called value stocks that had underperformed during the pandemic, bringing its losses since a peak last month to 8.1%.The rotation, along with higher bond yields that dim the allure of equities, is taking the shine off what had been one of the hottest investments on Wall Street, with ARKK growing 10-fold over the past year, including a whopping $2.37 billion inflow just last month. Since peaking on Feb. 12, ARKK’s price has now dropped by a fifth, the level that commonly defines a bear market.“People are worried the crowded trades will lose their momentum like they did last September” when some of the biggest tech names suffered a bout of selling, said Matt Maley, chief market strategist at Miller Tabak + Co.Yields on benchmark 10-year Treasury notes have jumped more than 50 basis points in 2021, on track for the largest quarterly increase since 2016. Consequently, it’s growing more difficult to justify sky-high valuations for highly speculative, expensive areas of the stock market.ARKK’s three largest holdings, Tesla Inc., Square Inc. and Roku Inc., have about tripled over the past year. Tesla is up close to 350%, while Square has surged about 200% and Roku is up more than 240%. On Wednesday, they all slumped.In fact, all but three stocks held by ARKK fell and three suffered losses exceeding 10%, including Stratasys Ltd., a maker of 3D printers, and Veracyte Inc., which develops molecular tests for oncology.The fund’s tilt toward long-term growth means short-term profitability isn’t a key consideration when stocks are picked. In fact, two-thirds of its current holdings didn’t make a profit in the past year. And even after the recent losses, ARKK is still slightly up for the year.Inflows to the fund have faltered in the past week, but there’s yet to be a mass exodus. ARKK took in more than $600 million combined the past two days, after losing more than $690 million last week in its worst five-day period on record.“There is growing unease in the markets and whether higher-risk asset classes can continue to climb,” said Michael Purves, chief executive officer at Tallbacken Capital Advisors. “If sentiment turns, you can see substantial outflows.”(Updates prices throughout)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • South Korea's first transgender soldier found dead

    Byun Hee-soo had been dismissed by the military for undergoing gender reassignment surgery.