Asia stocks, US futures climb; bond yields rise: markets wrap

Most Asian stocks rose Wednesday along with US equity futures as traders weighed positive regional economic data and the Federal Reserve’s signal of stepped up efforts to curb elevated inflation.

MSCI Inc.’s Asia-Pacific share index jumped the most since mid-October. South Korea led gains on strong export growth, while purchasing managers’ gauges pointed to resilient Asian manufacturing. S&P 500, Nasdaq 100 and European futures pushed higher, indicating stabilization after US stocks slumped.

Chair Jerome Powell said the next Fed meeting should discuss whether to wrap up bond purchases a few months sooner and retired the word “transitory” to describe high inflation. That could open the door to earlier interest-rate hikes. Money markets show about 60 basis points of increases priced in by end-2022.

The US 10-year Treasury yield climbed but remained below 1.50%. The gap between yields on 5-year and 30-year Treasuries was around the narrowest since March last year. Crude oil and commodity-linked currencies rebounded.

Volatility is buffeting markets as investors scrutinize whether the pandemic recovery can weather diminishing monetary policy support and potential risks from the omicron virus variant. While central banks are scaling back ultra-loose settings, financial conditions remain favourable in key economies.

The flattening Treasury yield curve “doesn’t suggest imminent doom for the equity market in and of itself,” Liz Ann Sonders, chief investment strategist at Charles Schwab & Co., said on Bloomberg Television. “Alarm bells go off in terms of recession” when the curve gets closer to inverting, she said.

The issue of raising or suspending the US debt ceiling is back on the radar. Elevated yields on some Treasury bills maturing in late December are hinting at concern the US will run out of borrowing capacity before the end of 2021.

Meanwhile, US President Joe Biden is expected to announce tighter testing requirements for all inbound travelers to help combat omicron.

Some key events to watch this week:

• Euro zone manufacturing PMI, Wednesday
• US construction spending, ISM Manufacturing, Fed’s Beige Book on Wednesday
• OPEC, allies may re-evaluate plans for reviving oil supplies, Thursday
• US initial jobless claims, Thursday
• US jobs report, factory orders, durable goods on Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.9% as of 7 a.m. in London. The S&P 500 fell 1.9%
• Nasdaq 100 futures rose 1.4%. The Nasdaq 100 fell 1.6%
• Japan’s Topix index added 0.4%
• Australia’s S&P/ASX 200 Index fell 0.3%
• South Korea’s Kospi index rose 2.1%
• Hong Kong’s Hang Seng Index climbed 1.1%
• China’s Shanghai Composite Index increased 0.4%
• Euro Stoxx 50 futures rose 0.9%

Currencies

• The Japanese yen was at 113.58 per dollar, down 0.4%
• The offshore yuan was at 6.3673 per dollar
• The Bloomberg Dollar Spot Index fell 0.1%
• The euro was at $1.1332

Bonds

• The yield on 10-year Treasuries rose two basis points to 1.47%
• Australia’s 10-year bond yield rose four basis points to 1.73%

Commodities

• West Texas Intermediate crude rose 2.9% to $68.16 a barrel
• Gold was at $1 787.41 an ounce, up 0.7%