(Bloomberg) — Asian stocks made a steady start Monday in the shadow of a jump in benchmark Treasury yields and ahead of the Federal Reserve policy meeting later this week.
Ten-year Treasury yields held around a one-year high as vaccine campaigns and the $1.9 trillion U.S. stimulus fan concerns about faster inflation amid an economic recovery. Australian and New Zealand 10-year yields rose Monday.
Equities advanced in Japan but edged lower in Australia and fluctuated in South Korea. S&P 500 and Nasdaq 100 futures made modest gains. The S&P 500 closed higher Friday amid rallies in financial and industrial shares. The Nasdaq 100 gauge slid and the Dow Jones Industrial Average added to its all-time high.
Elsewhere, oil climbed and Bitcoin traded below $60,000 after surpassing $61,000 in a meteoric rise. Tencent Holdings Ltd. will be in focus in Hong Kong on expectations that it faces increased regulatory supervision.
Markets are preoccupied with rising long-term borrowing costs and their implications for reflation trades and the rotation in the stock market from growth to value shares. The Fed decision later in the week is one of a slew due from central banks in developed and emerging nations.
“It’s not just a question of level, it’s a question of pace,” said Charles-Henry Monchau, who serves as both chief financial and chief investment officer at FlowBank SA. “Are we going to move on the bond yields too quickly too fast for the market to adjust or is it going to be a smooth journey to higher bond yields?” If bond yields rise in an orderly way and are backed by better growth, “you are going to see a continuation of this rotation,” he said.
Treasury Secretary Janet Yellen said U.S. inflation risks remain subdued despite the Biden administration stimulus. A strong recovery from the Covid-19 recession is likely to prompt Fed Chair Jerome Powell and his colleagues to lift interest rates in 2023, but that isn’t going to show up in their forecasts this week, a Bloomberg survey of economists showed.
Fed to Hike Rates in 2023 But Dots Won’t Show It, Economists Say
On the virus front, more countries have suspended the use of AstraZeneca Plc’s vaccine after some concerns around side effects. Most of Italy will return to lockdown on Monday amid a resurgence in infections.
These are some key events this week:
China industrial production and retail sales are due Monday.Fed Chair Jerome Powell will likely reaffirm his no-tightening policy stance at the Fed policy meeting Wednesday.Bank of England rate decision Thursday. BOE is expected to leave monetary policy unchanged.Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing Friday.
These are the main moves in markets:
S&P 500 futures rose 0.3% as of 9:30 a.m. in Tokyo. The S&P 500 Index rose 0.1%.Nasdaq 100 futures rose 0.3%. The Nasdaq 100 Index fell 0.9%.Japan’s Topix index rose 0.4%.Australia’s S&P/ASX 200 Index shed 0.1%.South Korea’s Kospi index was little changed.
The yen was at 109.04 per dollar.The offshore yuan was at 6.4994 per dollar.The Bloomberg Dollar Spot Index was flat.The euro traded at $1.1954.
The yield on 10-year Treasuries was steady at 1.62%.Australia’s 10-year bond yield jumped eight basis points to 1.79%.
West Texas Intermediate crude rose 0.4% to $65.90 a barrel.Gold was at $1,726.59 an ounce.
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