Gains in stocks, futures cool as bond yields jump: markets wrap

Asian stocks and US equity futures pared gains Tuesday amid a jump in Treasury yields and as an earlier lift to investor sentiment from a potential improvement in US-China ties ebbed.

An Asian share index came off session highs, in part as China turned lower. S&P 500 and Nasdaq 100 contracts made modest gains from Friday’s close. US markets were shut Monday for the Independence Day holiday.

The US may announce the rollback of some China levies as soon as this week to counter high inflation. Officials could also unveil a probe into industrial subsidies, which might lead to more duties in strategic areas like technology.

Chinese Vice Premier Liu He held a video talk with US Treasury Secretary Janet Yellen Tuesday morning on tariffs and supply chains.

The drop in Treasuries was led by shorter maturities, including a surge of as much as 13 basis points in the two-year yield. That extended a global bond retreat that began in Europe on Monday.

Speculation has intensified that President Joe Biden may reduce some Trump-era tariffs on $300 billion in Chinese imports. Policy makers are under pressure to tackle inflation, which has forced interest-rates higher, sapped economic expansion and contributed to steep equity and bond losses this year.

“Markets are likely to react positively on a knee-jerk because at this point we are hungry for any signs of positive news,” said Charu Chanana, senior markets strategist at Saxo Capital Markets Pte. “But we don’t see the move impacting the global growth and inflation dynamics in a significant way.”

In Australia, the central bank rose key interest rate as expected to 1.35%. It’s among more than 80 central banks to have raised rates this year. The nation’s dollar erased gains against the greenback after the decision.

Elsewhere, Brent crude hovered at $113 around barrel. Bitcoin retook the $20 000 level.

What to watch this week:

• PMIs for euro area, China, India among others, Tuesday
• US factory orders, durable goods, Tuesday
• FOMC minutes, US PMIs, ISM services, JOLTS job openings, Wednesday
• EIA crude oil inventory report, Thursday
• Fed Governor Christopher Waller, St. Louis Fed President James Bullard, scheduled to speak, Thursday
• ECB account of its June policy meeting, Thursday
• US employment report for June, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.4% as of 1:40 p.m. in Tokyo. The S&P 500 rose 1.1% Friday
• Nasdaq 100 futures rose 0.5%. The Nasdaq 100 rose 0.7% Friday
• Japan’s Topix index added 0.3%
• Australia’s S&P/ASX 200 climbed 0.4%
• South Korea’s Kospi index rose 1.4%
• China’s Shanghai Composite lost 0.2%
• Hong Kong’s Hang Seng index added 0.6%
• Euro Stoxx 50 futures increased 0.5%

Currencies

• The Bloomberg Dollar Spot Index was steady
• The euro was at $1.0434, up 0.1%
• The Japanese yen was at 136.25 per dollar, down 0.5%
• The offshore yuan was steady at 6.6922 per dollar

Bonds

• The US 10-year Treasury yield increased eight basis points to to 2.95%
• Australia’s 10-year yield fell one basis point to 3.55%

Commodities

• West Texas Intermediate crude was at $110.38 a barrel, up 1.8%
• Gold was at $1 811.86 an ounce, down 0.3%