Stock rally pauses amid virus caution; dollar firm: markets wrap

A stock rally paused in Asia on Wednesday and US equity futures wavered as traders continued to evaluate the economic impact of coronavirus flareups. Treasuries trimmed a decline and the dollar rose.

MSCI Inc.’s index of Asia-Pacific shares pared gains though remained on course to snap a three-day drop. Country performance was mixed, with Japan higher and Hong Kong retreating. US equity futures fluctuated after bargain hunters helped the S&P 500 to all but erase Monday’s slide in a rally led by cyclicals such as industrial stocks. European equity contracts edged up.

A rally in Treasuries has paused, sending 10-year yields back above 1.2%. It remains to be seen if the recovery in yields has legs amid lingering concerns about the delta virus variant that led traders to pare back bets on a Federal Reserve rate hike.

The dollar advanced against major peers for a fifth day. Oil slipped and Bitcoin was back above the $30 000 level.

Spiking cases of the more contagious delta strain and curbs to fight infections in a range of nations spooked investors this week, prompting a selloff in risk assets on Monday. But loose US monetary policy, still-high levels of economic expansion and robust corporate earnings growth remain props for sentiment.

“The correction we had is healthy to clear some of the excess out of the market and to get better balancing between growth and value,” Katie Koch, Goldman Sachs Asset Management’s co-head of fundamental equity, said on Bloomberg Television. “From a long-term perspective we are really still very constructive on equity markets, so we’d encourage clients to be overweight risk assets.”

Data showed US housing starts increased in June by more than forecast, suggesting residential construction is stabilising despite lingering supply-chain constraints and labour shortages.

Elsewhere, traders are monitoring ongoing political talks over a bipartisan $579 billion US infrastructure spending package, part of President Joe Biden’s plan for a major fiscal injection into the US economy. Separately, Biden administration officials said they’re starting to see signs of relief for the global semiconductor supply shortage.

On the virus front, South Korea and Thailand reported record infections. Japan’s top Covid-19 adviser said new cases in Tokyo, where the Olympics start this week, could hit a record in early August. Johnson & Johnson’s single-dose vaccine produced relatively low levels of antibodies against the delta variant, according to a study that hasn’t yet been peer reviewed.

Some key events to watch this week:

• European Central Bank rate decision Thursday
• Bank Indonesia rate decision Thursday
• US existing home sales Thursday
• The Tokyo Summer Olympics begin Friday

Here are some of the main market moves:

Stocks

• S&P 500 futures were little changed as of 7 a.m. in London. The S&P 500 rose 1.5%
• Nasdaq 100 futures dipped 0.1%. The Nasdaq 100 rose 1.2%
• Japan’s Topix index climbed 0.8%
• Australia’s S&P/ASX 200 index gained 0.9%
• South Korea’s Kospi index slipped 0.5%
• Hong Kong’s Hang Seng index fell 0.7%
• China’s Shanghai Composite index gained 0.7%
• Euro Stoxx 50 contracts added 0.2%

Currencies

• The Japanese yen was at 109.92 per dollar
• The offshore yuan traded at 6.4793 per dollar, up 0.1%
• The Bloomberg Dollar Spot Index rose 0.2%
• The euro was at $1.1767

Bonds

• The yield on 10-year Treasuries dipped one basis point to 1.21%
• Australia’s 10-year bond yield was at 1.17%

Commodities

• West Texas Intermediate crude was at $66.89 a barrel, down 0.5%
• Gold was at $1 810.82 an ounce