Asian Stocks Mixed After Jump in Yields, Dollar: Markets Wrap

(Bloomberg) -- Asian stocks were mixed Tuesday after a jump in Treasury yields and the dollar as Jerome Powell’s renomination to head the Federal Reserve fueled bets on a quicker withdrawal of monetary stimulus.

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A Hong Kong gauge of Chinese technology stocks dropped amid speculation over stiffer regulations, while an iron-ore rebound bolstered commodity-reliant Australia. U.S. equity futures wavered and European contracts dipped. A final-hour Wall Street tech selloff left U.S. shares in the red.

Treasuries slid in U.S. hours. Markets are pricing in a full quarter-point rate hike into the June Fed meeting and seeing a good chance of a second by September and a third by December to fight price pressures. Powell said the Fed would use its tools to support the economy and labor market and prevent higher inflation from becoming entrenched.

Treasury futures edged lower. Cash Treasuries won’t trade in Asia due to a holiday in Japan. The dollar was around the highest since September 2020, while the yen fell past 115 per dollar for the first time since March 2017.

President Joe Biden opted for continuity at the Fed, selecting Powell for a second term as chair and elevating Lael Brainard to vice chair. They face the task of containing the cost of living while nurturing the pandemic recovery and averting financial-market dislocations. Inflation and bolstering employment were repeatedly mentioned in Biden’s briefing on his selection.

“While investors no longer have to wonder about who will be leading the Federal Reserve for the next few years, the next big dilemma the central bank faces is how to normalize monetary policy without upsetting markets,” Robert Schein, chief investment officer at Blanke Schein Wealth Management, wrote in an email.

Read: Powell Pick Seen Positive for Risk Despite Knee-Jerk Selloff

Fed Bank of Atlanta President Raphael Bostic said the U.S. central bank may need to speed up removal of monetary stimulus in response to strong employment gains and surging inflation, allowing for an earlier-than-planned increase in interest rates.

Following Powell’s renomination, “the market has unwound hedges against a more ‘dovish’ personnel shift,” Chris Weston, head of research with Pepperstone Financial Pty Ltd., wrote in a note. He flagged the possibility of volatility in December if financial conditions tighten.

Elsewhere, bullion trimmed a slump, and oil retreated ahead of an expected announcement by the U.S. on a coordinated release of reserves.

For more market analysis, read our MLIV blog.

Here are some key events this week:

• Eurozone, U.S. PMI data Tuesday

• Reserve Bank of New Zealand rate decision Wednesday

• U.S. FOMC minutes, consumer income, wholesale inventories, new home sales, GDP, initial jobless claims, U.S. durable goods, University of Michigan consumer sentiment. All Wednesday

• Bank of Korea policy decision Thursday

• U.S. Thanksgiving Day: U.S. equity, bond markets closed Thursday

• Bank of England Governor Andrew Bailey speaks with Mohamed El Erian at a Cambridge Union event. Thursday

Some of the main moves in markets:

Stocks

• S&P 500 futures shed 0.1% as of 2:26 p.m. in Tokyo. The S&P 500 fell 0.3%

• Nasdaq 100 futures fell 0.2%. The Nasdaq 100 dropped 1.2%

• Australia’s S&P/ASX 200 Index rose 0.8%

• South Korea’s Kospi index fell 0.5%

• Hong Kong’s Hang Seng Index fell 1.1%

• China’s Shanghai Composite Index rose 0.4%

• Euro Stoxx 50 futures retreated 0.5%

Currencies

• The Japanese yen was at 115.06 per dollar, down 0.2%

• The offshore yuan was at 6.3871 per dollar

• The Bloomberg Dollar Spot Index was little changed

• The euro was at $1.1239

Bonds

• The yield on 10-year Treasuries advanced eight basis points to 1.62% on Monday

• Australia’s 10-year bond yield rose eight basis points to 1.87%

Commodities

• West Texas Intermediate crude fell 0.7% to $76.18 a barrel

• Gold was at $1,808.72 an ounce, up 0.2%

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