Asian stocks slip; bond curves flag growth fears

Commodities including iron ore and crude oil dropped.
Image: Kiyoshi Ota/Bloomberg

Asian stocks fell Thursday amid concerns that the recovery from the pandemic will slow as elevated inflation forces tighter monetary policy. Commodities including iron ore and crude oil dropped.

Shares slipped in Japan and China and were little changed in South Korea, where Samsung Electronics Co.’s third-quarter profit exceeded estimates. US and European futures edged up after the tech-heavy Nasdaq 100 touched an intraday record and the S&P 500 dipped but stayed in sight of all-time highs.

Longer term US Treasuries held a rally. Flatter sovereign-yield curves are highlighting growth worries as price pressures stoked by an energy crunch and supply-chain snarls push central banks toward paring accommodation. Australia’s sovereign yields surged after the monetary authority opted against defending its yield target, spurring speculation about a possible policy shift.

Risks from China’s property-market slowdown and crackdown on private enterprise are also still in focus. The yen and gold advanced and resource-linked currencies struggled in a sign of cautious investor sentiment.

Global stocks are still near all-time peaks, supported by a robust corporate earnings season so far. The risk is sentiment could weaken if investors lose confidence in the ability of policy makers to contain inflation while nurturing the economic rebound. The resilience of the Nasdaq 100 overnight and tumble in US small-cap shares hinted at doubts about the so-called reopening trade.

There seems to be “less confidence that the Fed will be able to thread the needle and neither end up behind the curve with its taper timeline/gradual hikes nor ahead of the curve if it reacts too quickly,” Jonathan Cohn, head of rates trading strategy at Credit Suisse, wrote in a note.

Investors are awaiting the European Central Bank policy meeting as well as a report later Thursday on US economic growth, which is likely to show a cooling recovery. The Bank of Japan left its main policy settings unchanged.

Meanwhile, the White House is stepping up pressure on congressional Democrats to finalize a framework for President Joe Biden’s tax-and-spending plan of as much as $2 trillion. On the virus front, cases continue to escalate in a number of countries. Singapore said it’s investigating an “unusual surge” of infections.

In cryptocurrencies, Bitcoin retreated below $60 000, falling further back from the peak of almost $67 000 reached last week.

Here are some events to watch this week:

  • ECB rates decision, President Christine Lagarde briefing, Thursday
  • US GDP, initial jobless claims, Thursday
  • G-20 joint finance and health ministers meeting ahead of the weekend leaders’ summit, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.2% as of 6:45 a.m. in London. The S&P 500 fell 0.5%
  • Nasdaq 100 futures increased 0.2%. The Nasdaq 100 rose 0.3%
  • Japan’s Topix index fell 0.5%
  • South Korea’s Kospi was little changed
  • Australia’s S&P/ASX 200 Index shed 0.3%
  • Hong Kong’s Hang Seng Index was flat
  • China’s Shanghai Composite Index fell 1%
  • Euro Stoxx 50 futures rose 0.1%

Currencies

  • The Japanese yen was at 113.53 per dollar, up 0.3%
  • The offshore yuan was at 6.3979 per dollar, down 0.1%
  • The Bloomberg Dollar Spot Index was steady
  • The euro was at $1.1605

Bonds

  • The yield on 10-year Treasuries rose about one basis point to 1.55%
  • Australia’s 10-year bond yield was at 1.84%, up three basis points

Commodities

  • West Texas Intermediate crude fell 1.3% to $81.56 a barrel
  • Gold was at $1 801.94 an ounce, up 0.3%
© 2021 Bloomberg

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