Asian Stocks Dip, Treasuries Steady; Dollar Firm: Markets Wrap

(Bloomberg) -- Most Asian stocks dipped Wednesday after robust U.S. economic data lifted Wall Street shares, Treasury yields and the dollar and spurred more calls for tighter monetary policy.

Equities were lower in Japan and Hong Kong -- including a drop in Chinese technology stocks -- while U.S. futures were little changed. The S&P 500 extended a rally overnight, buoyed by expanding retail sales and generally solid reports from Walmart Inc. and Home Depot Inc. 

Still, a call for more hawkish monetary policy from Federal Reserve Bank of St. Louis President James Bullard underlined worries that high inflation could eventually bite.

Treasuries held losses, with the 10-year yield above 1.6%. Traders are waiting to see the strength of demand at an auction of 20-year notes Wednesday. The dollar was near the highest level in 12 months, while the yen was trading around its weakest against the greenback in more than four years. 

Corporate profits have generally weathered the price pressures filtering through the world economy, helping global stocks to stay around all-time highs. The key question remains whether the jump in costs will prove transitory or become a bigger challenge that forces a sharper monetary policy response, roiling both shares and bonds.

“We expect more volatility ahead with rising rates,” while inflation and Covid concerns continue to stir anxiety, but equity markets “should remain strong” heading into the year-end, Xi Qiao, a managing director at UBS Global Wealth Management, said on Bloomberg Television.

Markets are waiting for President Joe Biden to select the Fed chair nominee, with Jerome Powell’s current term ending in February. Biden said the pick is coming in about four days, with Powell and Governor Lael Brainard both in the frame.

Meanwhile, Treasury Secretary Janet Yellen indicated the U.S. government would be at risk of default unless lawmakers lift the legal debt ceiling by Dec. 15. Yields on Treasury bills maturing at the end of the year rose.

Elsewhere, cryptocurrencies remained lower after a tumble, with Bitcoin trading around $60,000.

What to watch this week:

• Euro region CPI. Wednesday
• U.S. housing starts. Wednesday
• Conference Board U.S. leading index, initial jobless claims. Thursday
• Fed’s Richard Clarida and Mary Daly speak at Asia Economic Policy Conference. Friday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 10:51 a.m. in Tokyo. The S&P 500 rose 0.4%
• Nasdaq 100 futures were little changed. The Nasdaq 100 rose 0.8%
• Japan’s Topix index fell 0.6%
• Australia’s S&P/ASX 200 Index fell 0.6%
• South Korea’s Kospi index lost 0.9%
• Hong Kong’s Hang Seng Index slid 0.4%
• China’s Shanghai Composite Index dipped 0.1%

Currencies

• The Japanese yen was at 114.81 per dollar
• The offshore yuan was at 6.3848 per dollar
• The Bloomberg Dollar Spot Index dipped 0.1%
• The euro was at $1.1322

Bonds

• The yield on 10-year Treasuries was at 1.64%
• Australia’s 10-year bond yield was at 1.84%

Commodities

• West Texas Intermediate crude fell 0.7% to $80.18 a barrel
• Gold was at $1,854.71 an ounce, up 0.2%

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