Stocks Mixed, Bonds Retreat Amid Inflation Worry: Markets Wrap

(Bloomberg) -- Asian stocks were mixed Thursday after the hottest U.S. inflation print in three decades hurt Wall Street shares and sparked a jump in Treasury yields amid concern monetary policy will be tightened more quickly.

Equities rose in Japan and China but slipped in Hong Kong. U.S. futures were steady as traders digested filings showing Tesla Inc. Chief Executive Officer Elon Musk unloaded $5 billion of stock in the electric car-maker. The S&P 500 dropped and the Nasdaq 100 underperformed as investors questioned the richer valuations of technology stocks.

Concerns about price pressures brought forward expectations of interest-rate hikes. Treasury yields soared across the curve, with the 10-year yield up more than 10 basis points. A poorly received 30-year auction added to the angst. Sovereign bonds slid in Australia and New Zealand. There’s no cash Treasuries trading Thursday due to a U.S. holiday.

The dollar was around a one-year high. Gold held a gain and Bitcoin was around $64,650 after dipping from a fresh all-time high Wednesday. Oil steadied after a tumble caused partly by a surprise rise in U.S. stockpiles.

The argument that price pressures are temporary due to pandemic-related distortions is under pressure. Traders are contemplating the prospect of the Federal Reserve raising rates as soon as it completes the tapering of bond purchases by the middle of next year. A more hawkish outlook is a risk for global stocks, which remain near record levels.

“This is the perfect time to gravitate toward defensive plays, to take profit and to be in the sectors that are strategically positioned toward this volatile market that presents a lot of challenges,” Katerina Simonetti, senior vice president at Morgan Stanley Private Wealth Management, said on Bloomberg Television.

U.S. bond market expectations for inflation surged. The so-called five-year breakeven rate advanced to a record high above 3%. Treasury Secretary Janet Yellen on Tuesday reiterated her view that elevated inflation won’t persist beyond next year and said the Fed will not allow a repeat of 1970s-style price rises.

Meanwhile, China’s flagship securities newspapers reported bank lending to property developers rose sharply in October and the momentum is expected to extend into November. That added to signs that credit conditions may be easing for the battered real-estate industry. Property stocks advanced.

China Evergrande Group looks set to avert default after paying overdue interest on three U.S. dollar bonds, while Kaisa Group Holdings Ltd. faces two dollar-bond interest payments this week.

What to watch this week:

• China’s Communist Party’s decision-making Central Committee meets through Thursday
• 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 were steady as of 2 p.m. in Tokyo. The S&P 500 fell 0.8%
• Nasdaq 100 futures added 0.1%. The Nasdaq 100 fell 1.4%
• Japan’s Topix index rose 0.3%
• Australia’s S&P/ASX 200 Index fell 0.6%
• South Korea’s Kospi index fell 0.6%
• Hong Kong’s Hang Seng Index dropped 0.1%
• China’s Shanghai Composite Index added 0.7%
• Euro Stoxx 50 futures fell 0.4%

Currencies

• The Japanese yen was at 113.97 per dollar, down 0.1%
• The offshore yuan was at 6.4053 per dollar
• The Bloomberg Dollar Spot Index rose 0.1%
• The euro was at $1.1479

Bonds

• The yield on 10-year Treasuries rose 11 basis points to 1.55% Wednesday
• Australia’s 10-year bond yield jumped eight basis points to 1.81%

Commodities

• West Texas Intermediate crude was at $81.57 a barrel, up 0.3%
• Gold was at $1,849.98 an ounce

©2021 Bloomberg L.P.