Asia Stocks to Slip As Virus Setbacks Boost Havens: Markets Wrap

(Bloomberg) -- Asian stocks are poised to open weaker after setbacks to the recovery from the pandemic weighed on U.S. equities and oil, and drove haven trades into Treasuries and the dollar.

Nasdaq 100 futures outperformed in early Asia trading, while S&P 500 contracts were steady after a drop in the index. Reopening trade favorites underperformed in U.S. hours, with the small-cap Russell 2000 dropping 3.6%, and an index of airline shares fell the most since October. Australia opened little changed and futures pointed lower in Japan and Hong Kong.

U.S. bond yields slid for a second day as Federal Reserve Chairman Jerome Powell played down inflation risks. A solid two-year Treasury auction helped allay concerns that poor appetite for this week’s sales could propel yields higher again. The rate on New Zealand’s 10-year note slumped 15 basis points as the government’s move to curb housing-market speculation saw traders pull positions for early rate hikes.

Oil slid further below $60 a barrel as renewed lockdowns in Europe clouded the prospects for a speedy recovery in consumption.

Market sentiment has faltered on doubts about the progress of the global economic reopening, even as the U.S. government plans more measures to spur growth. Bonds have also benefited from the central bank’s latest assurances of continued support. These are reminders of the fragility of the recovery as investors contemplate the 75% rally in the S&P 500 since its bear-market trough a year ago.

“We have a lot of innovation happening, incredible advancement in health-care technology, rapid vaccine development,” Dune Thorne, a partner at Brown Advisory LLC, said on Bloomberg TV. “But at the same time, there’s risk around inflation and rising rates and the impact that will have on equities.”

Germany, France and Italy have widened lockdowns and cases are spiking in other countries. The head of the World Health Organization called recent increases in deaths and cases “truly worrying trends.”

These are some key events to watch this week:

• The U.S. Treasury holds auctions of five- and seven-year debt.
• EIA crude oil inventory report on Wednesday.
• U.S. personal income and spending data on Friday.

These are some of the main moves in financial markets:

Stocks

• S&P 500 futures were steady as of 8:15 a.m. in Tokyo. Nasdaq 100 futures rose 0.2%. The S&P 500 Index fell 0.8%.
• Nikkei 225 futures fell 0.6%.
• Australia’s S&P/ASX 200 Index was little changed.
• Hong Kong’s Hang Seng Index futures fell 0.2% earlier.

Currencies

• The yen was at 108.61 per dollar.
• The Bloomberg Dollar Spot Index gained 0.6%.
• The euro was at $1.1850 after dropping 0.7%.
• The British pound traded at $1.3756 after sinking 0.8%.

Bonds

• The yield on 10-year Treasuries fell seven basis points to 1.62%.
• Australia’s 10-year bond yield lost four basis points to 1.69%.

Commodities

• West Texas Intermediate crude fell 0.4% to $57.52 a barrel, extending a 6.2% decline.
• Gold was at $1,726 an ounce.

©2021 Bloomberg L.P.