US and European equity futures fell Wednesday and Asian stocks dipped as Treasury yields extended an advance amid a surge in energy costs that’s stoking inflationary pressures. The dollar climbed.
MSCI Inc.’s Asia-Pacific index retreated for a fourth session, contrasting with an overnight Wall Street rebound spurred by bargain-hunting in beaten-down technology stocks. S&P 500 and Nasdaq 100 contracts declined.
The yields on 10-year and 30-year US Treasuries both reached the highest since June. Faster-than-expected US service-sector activity and price pressures from spiraling costs for crude oil and natural gas are adding to the case for a reduction in Federal Reserve bond-buying.
Traders are awaiting jobs data this week for more clues about the Fed policy outlook. In New Zealand, the central bank raised interest rates for the first time in seven years. The kiwi led declines among Group-of-10 currencies on weak risk sentiment and a lack of clarity over the pace of future rate hikes.
Volatility has picked up in markets as investors brace for a slower but still robust recovery from the pandemic and gradual monetary-policy tightening to contain the cost of living. US political gridlock over the nation’s debt ceiling and President Joe Biden’s economic agenda is contributing to the uncertainty.
“For the last five or six months we’ve entered a period of kind of a mini-cycle in the US where you’ve got a changing Fed regime, and we are at the extended end of a recovery,” Kieran Calder, Union Bancaire Privee Head of Equity Research for Asia, said on Bloomberg Television. “It leaves the market vulnerable to external shocks and increased volatility.”
The 10-year US breakeven rate — a proxy for where investors see annual inflation over the next decade — is near the highest since June. Prolonged supply chain disruptions and jumping raw-material prices are feeding into worries about rising costs.
“Right now you’re seeing inflation risk really start to percolate and I do think that you’re going to see that really eat into margins as we go through the fourth quarter into 2022,” Erin Browne, multi-asset portfolio manager at Pimco, said on Bloomberg Television. “The energy crisis that’s starting to loom in Europe is a real risk that is being underestimated by the market right now.”
Meanwhile, crude oil steadied near a seven-year high and Bitcoin held a climb past the $51 000 mark. Elsewhere, concerns about China’s highly-leveraged property sector continue to weigh on sentiment. The nation’s markets are closed for a holiday and reopen Friday.
Here are some events to watch this week:
- Reserve Bank of India monetary policy decision on Friday
- The US Labour Department releases unemployment and job creation data Friday
Some of the main moves in markets:
- S&P 500 futures fell 0.5% as of 7:26 a.m. in London. The S&P 500 rose 1.1%
- Nasdaq 100 futures declined 0.6%. The Nasdaq 100 rose 1.4%
- Japan’s Topix index declined 0.3%
- Australia’s S&P/ASX 200 Index shed 0.6%
- South Korea’s Kospi index fell 1.5%
- Hong Kong’s Hang Seng Index fell 0.4%
- Euro Stoxx 50 futures fell 0.9%
- The Japanese yen traded at 111.76 per dollar, down 0.3%
- The offshore yuan was at 6.4531 per dollar
- The Bloomberg Dollar Spot Index added 0.2%
- The euro was at $1.1579
- The yield on 10-year Treasuries advanced about four basis points to 1.56%
- Australia’s 10-year bond yield climbed about nine basis points to 1.61%
- West Texas Intermediate crude was at $79.36 a barrel, up 0.5%
- Gold was at $1 752.44 an ounce, down 0.4%