Stocks mixed after US records; bond yields dip: markets wrap

Asian shares and US equity futures swung between red and green Monday as the global economic recovery and corporate earnings prospects bouyed investor sentiment despite rising Covid-19 infections.

Chinese stocks outperformed amid easing concerns about the health of state enterprise China Huarong Asset Management Co., a distressed-debt manager. Japan edged down. India’s benchmark fell to the lowest since February after daily virus cases hit a record. Nasdaq 100 futures got a boost from easing Treasury yields, and S&P 500 contracts were steady after the US gauge chalked a fourth week of gains to a fresh all-time high. European futures rose.

Some risk-off trade showed up in the foreign-exchange markets owing to tension between the US and both Russia and China. The dollar and yen advanced against their Group-of-10 peers. Bitcoin pared losses after tumbling the most since February over the weekend.

China’s financial regulator on Friday said Huarong had ample liquidity, the first official comments since the company missed a deadline to report earnings. Ebbing fears of contagion drove a rally in Huarong bonds.

Robust economic data from China and the US have buoyed investor sentiment, pushing the MSCI All-Country World Index to another record despite concerns surrounding the spread of Covid-19 variants. New infections in the past week surpassed 5.2 million, the most since the pandemic began.

The risk of another destabilising increase in borrowing costs has also subsided, as bond yields have pulled back from recent highs. This week traders will look for further confirmation of the private sector’s recovery from the pandemic as the earnings season gathers pace.

“Our current view is that with short-term interest rates set to remain low for the medium term and our expectation that earnings will continue to increase, it is unlikely that the increase in long-term interest rates will trigger an equity market fall,” Russel Chesler, head of investments and capital markets at VanEck Australia, said in a note.

The European Central Bank decision later in the week will also draw attention. The ECB is likely to keep policy unchanged, and to sound cautiously optimistic on the economy and stabilization in borrowing rates. It’s probably too soon for further details about the plans for the asset purchase program beyond the second quarter.

Here are some key events to watch this week:

• Apple’s first product unveiling of the year on Tuesday.
• Reserve Bank of Australia releases minutes of its policy meeting on Tuesday.
• EIA crude oil inventory report on Wednesday.
• European Central Bank rate decision and President Christine Lagarde briefing on Thursday.
• US releases manufacturing and services purchasing managers indexes Friday.

These are some of the main moves in financial markets:

Stocks

• S&P 500 futures fell 0.2% as of 7 a.m. in London. The S&P 500 Index climbed 0.4%.
• Japan’s Topix index fell 0.2%.
• Australia’s S&P/ASX 200 Index rose 0.1%.
• Hong Kong’s Hang Seng Index rose 0.4%.
• China’s Shanghai Composite Index added 1.3%
• South Korea’s Kospi index was flat.
• Euro Stoxx 50 futures added 0.2%.

Currencies

• The yen was at 108.53 per dollar, up 0.3%.
• The Bloomberg Dollar Spot Index was little changed.
• The euro traded at $1.1964, down 0.2%.
• The offshore yuan was at 6.5281 per dollar.

Bonds

• The yield on 10-year Treasuries fell two basis points to 1.56%.
• The yield on Australia’s 10-year bond edged down to 1.72%.

Commodities

• West Texas Intermediate crude lost 0.4% to $62.91 a barrel.
• Gold was little changed at $1 776.34 an ounce.