Asia Stocks Set for Mixed Start; Treasuries Jumped: Markets Wrap

Andreea Papuc
·3 min read

(Bloomberg) -- Asian stocks are set for a mixed start Wednesday after U.S. shares snapped their longest winning streak since 2017. Treasuries rallied, with some traders citing an unwinding of bearish bond bets.

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Futures for Japan were steady and those for Hong Kong fell. Australia opened little changed, while U.S. futures slipped. The S&P 500 dipped for the first time in nine sessions, hurt by financial shares amid a slump in the 10-year U.S. Treasury yield. The Nasdaq 100 underperformed, in part on Tesla Inc.’s loss of $199 billion in value on a host of negative news.

A global bond rally saw the 30-year U.S. Treasury yield at one point reach the lowest since July, narrowing the yield gap between shorter and longer maturity bonds. Aside from the short-squeeze, speculation about a possible dovish shift in the leadership of the Federal Reserve also boosted Treasuries. The dollar edged down.

Markets continue to grapple with the impact of elevated inflation in the pandemic recovery. China is expected to report the highest factory-gate inflation in 26 years. U.S. producer-price inflation is running at an annual pace close to 9%, and traders are awaiting Wednesday’s consumer-price report.

Persistent price pressures that accelerate monetary-policy tightening could topple global stocks from near-record levels. San Francisco Fed President Mary Daly indicated she expected “eye-popping” inflation to subside next year as supply-chain snarls abate. St. Louis Fed President James Bullard noted corporate pricing power and reiterated he’s penciled in two rate hikes in 2022.

“Because we haven’t seen inflation for a while, people aren’t used to it,” Drew Matus, chief market strategist at MetLife Investment Management, said on Bloomberg Television. “What we should expect over the next half a year is as people become more understanding of what the Fed might do we are going to see more volatility.”

Meanwhile, China Evergrande Group is facing its biggest payment test since signs of a liquidity crisis emerged at the firm five months ago. Investors are waiting to see if the embattled developer makes coupon payments totaling $148.1 million for three dollar bonds before the end of 30-day grace periods Wednesday.

Separately, U.S. President Joe Biden and his Chinese counterpart Xi Jinping are scheduled to hold a virtual summit next week, according to people familiar with the matter.

Oil extended an advance toward $85 a barrel on speculation that the Biden administration may pull the plug on any plans to release crude from the nation’s emergency reserves after a U.S. energy report showed supplies rising next year.

In cryptocurrencies, Bitcoin was trading just below $68,000, not far from the record high it scaled on Tuesday.

What to watch this week:

  • China’s Communist Party’s decision-making Central Committee meets through Thursday

  • China PPI Wednesday

  • U.S. wholesale inventories, CPI, initial jobless claims Wednesday

  • U.S. bond marked is closed in observance of Veterans Day Thursday

  • China holds its annual Singles’ Day, the world’s biggest shopping festival, when e-commerce giants like Alibaba and JD.com Inc. lure buyers with bargains Thursday

For more market analysis, read our MLIV blog.

Stocks

  • S&P 500 futures fell 0.1% as of 8:07 a.m. in Tokyo. The S&P 500 fell 0.4%

  • Nasdaq 100 futures fell 0.1%. The Nasdaq 100 fell 0.7%

  • Nikkei 225 futures were steady

  • Australia’s S&P/ASX 200 Index were little changed

  • Hang Seng Index futures dropped 0.4%

Currencies

  • The Japanese yen was at 112.92 per dollar

  • The offshore yuan was at 6.3892 per dollar

  • The Bloomberg Dollar Spot Index fell 0.1%

  • The euro was little changed at $1.1594

Bonds

  • The yield on 10-year Treasuries declined five basis points to 1.44%

  • Australia’s 10-year bond yield fell five basis points to 1.73%

Commodities

  • West Texas Intermediate crude rose 0.7% to $84.76 a barrel

  • Gold was at $1,831.77 an ounce

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