Stocks fall as treasury 10-year yield exceeds 2.8%: markets wrap

Asian stocks dipped Tuesday, while a selloff in bonds left the 10-year Treasury yield at the highest since 2018, as risks from high inflation, tightening monetary policy and China’s Covid outbreak ripple across markets.

MSCI Inc.’s Asia-Pacific equity index fell for a second day, with Japan underperforming. US and European futures were in the red following a Wall Street retreat Monday that pushed losses in the technology-heavy Nasdaq 100 past $1 trillion in the past five sessions.

China’s approval of the first batch of new video game licenses since July eased some of the concerns about Beijing’s gaming-sector curbs, but the market reaction was restrained. Tencent Holdings Ltd. was among firms to climb.

US Treasuries declined, taking the 10-year yield past 2.80%, as the global bond rout continued. A dollar gauge is on its longest winning streak since 2020. Both trends reflect expectations that the Federal Reserve will implement its fastest tightening since 1994. Australian and New Zealand debt also dropped.

Oil rebounded after a tumble that saw crude erase most of the gains sparked by Russia’s invasion of Ukraine. China’s virus outbreaks and mobility curbs, in pursuit of a controversial Covid-zero strategy, are imperiling demand.

The next major test for markets looms later Tuesday, when the US is expected to unveil an inflation print for March of more than 8%. While that could mark the peak, there are fears that price pressures will remain elevated. The Ukraine war is disrupting flows of essential commodities, and China’s lockdowns are straining supply chains.

“What we’re faced with this year is stagflation,” Kathryn Rooney Vera, head of global macro research at Bulltick LLC, said on Bloomberg Television. “It’s a very complicated environment that the Fed has found itself in” and the market is pricing in potentially 50 basis points of hikes at each of the next two policy meetings, she added.

Charles Evans, the Fed Bank of Chicago president who has long been one of the more dovish US policy makers, said an accelerated pace of rate hikes to combat inflation is worth debating.

The central bank is doing all it can to avoid “collateral damage” from raising interest rates, a “brute-force tool” that can act as a “hammer” on the economy, Fed Governor Christopher Waller said.

One of the more dangerous scenarios for markets “is that we have to raise rates at such a pace that it will clamp down on growth,” Kathryn Kaminski, chief research strategist at AlphaSimplex Group, said on Bloomberg Television. “That’s the scenario that most people are worried about.”

Elsewhere, Bitcoin sank, part of broad weakness in cryptocurrencies, pushing the world’s largest digital token below $40 000.

Events to watch this week:

• Earnings season kicks off, including reports from Citigroup, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Taiwan Semiconductor Manufacturing, Wells Fargo
• US CPI, Tuesday
• OPEC monthly oil market report, Tuesday
• Fed Governor Lael Brainard, Richmond Fed President Thomas Barkin due to speak, Tuesday
• Bank of Canada rate decision, Wednesday
• EIA crude oil inventory report, Wednesday
• Reserve Bank of New Zealand rate decision, Wednesday
• China trade, medium-term lending facilities, Wednesday
• ECB rate decision, Thursday
• Bank of Korea policy decision, Thursday
• US retail sales, initial jobless claims, business inventories, University of Michigan consumer sentiment, Thursday
• Cleveland Fed President Loretta Mester, Philadelphia Fed President Patrick Harker due to speak Thursday
• US stock and bond markets are among those closed for Good Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures shed 0.5% as of 2:08 p.m. in Tokyo. The S&P 500 fell 1.7%
• Nasdaq 100 futures fell 0.6%. The Nasdaq 100 fell 2.4%
• Japan’s Topix index dropped 1.5%
• Australia’s S&P/ASX 200 Index fell 0.6%
• South Korea’s Kospi index fell 1.2%
• Hong Kong’s Hang Seng Index rose 0.9%
• China’s Shanghai Composite Index fell 0.8%
• Euro Stoxx 50 futures were 1.3% lower

Currencies

• The Japanese yen traded at 125.38 per dollar
• The offshore yuan was at 6.3806 per dollar, up 0.1%
• The Bloomberg Dollar Spot Index was steady
• The euro was at $1.0878, down 0.1%

Bonds

• The yield on 10-year Treasuries advanced four basis points to 2.82%
• Australia’s 10-year yield jumped eight basis points to 3.09%

Commodities

• West Texas Intermediate crude rose 1.8% to $96 a barrel
• Gold was at $1 957.29 an ounce, up 0.2%