Stocks rise as treasuries steady; yen snaps drop: markets wrap

Most Asian stocks rose Wednesday and a selloff in Treasuries paused as investors evaluated the economic outlook amid high inflation, a hawkish Federal Reserve and China’s Covid challenges.

Japan helped an Asia-Pacific equity gauge climb for the first session in four. China wavered after its banks held lending rates, disappointing investors looking for a cut to support an economy sagging under Covid lockdowns.

US equity futures retreated amid an after-hours slump in Netflix Inc. on poor subscriber numbers. That tempered some of the optimism from a rally in the S&P 500 index ahead of the streaming giant’s results.

Treasuries edged up, paring a tumble from Tuesday. But they remain under longer term pressure from hardening expectations of sharp Federal Reserve policy tightening. Chicago Fed President Charles Evans said interest rates will probably exceed the neutral level in the campaign to damp price pressures.

The dollar declined and the yen revived after a prolonged slump. The yen remains the weakest performer in the Group of 10 this year on the policy contrast with the US: the Bank of Japan offered to buy an unlimited amount of bonds to contain yields, underscoring its desire for loose monetary settings.

The fallout from price pressures, Russia’s war in Ukraine and China’s parlous economic outlook continue to shape sentiment. US 10-year real yields briefly turned positive for the first time since 2020, reflecting tighter financial conditions that may sap riskier investments such as equities.

“It takes time for the market to recognize and then respond to higher inflation,” Belita Ong, chairman at Dalton Investments LLC, said on Bloomberg Radio. “My concern is that we benefited from low interest rates during an era of peace, no wars, and during an era of very significant globalization. Both of those trends are now reversing.”

Elsewhere, oil rebounded after posting the biggest slump in almost two weeks, with an industry report pointing to a drop in US stockpiles.

What to watch this week:

• Earnings include American Express, China Telecom, Tesla
• EIA crude oil inventory report, Wednesday
• Federal Reserve Beige Book, Wednesday
• French presidential election debate, Wednesday
• San Francisco Fed President Mary Daly, Chicago Fed President Charles Evans, due to speak, Wednesday
• Euro zone CPI, U.S. initial jobless claims, Thursday
• Fed Chair Jerome Powell, ECB President Christine Lagarde discuss global economy at IMF event, Thursday
• Manufacturing PMIs: Euro zone, France, Germany, U.K, Friday
• Bank of England’s Andrew Bailey to speak, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.4% as of 1:08 p.m. in Tokyo. The S&P 500 rose 1.6%
• Nasdaq 100 futures fell 0.8%. The Nasdaq 100 rose 2.2%
• Japan’s Topix index rose 0.7%
• Australia’s S&P/ASX 200 Index climbed 0.3%
• South Korea’s Kospi index fell 0.1%
• Hong Kong’s Hang Seng index rose 0.8%
• China’s Shanghai Composite index dropped 0.2%
• Euro Stoxx 50 futures added 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro was at $1.0819, up 0.3%
• The Japanese yen was at 128.43 per dollar, up 0.4%
• The offshore yuan was at 6.4164 per dollar

Bonds

• The yield on 10-year Treasuries was at 2.93%
• Australia’s 10-year bond yield rose four basis points to 3.11%

Commodities

• West Texas Intermediate crude rose 0.9% to $103.51 a barrel
• Gold was at $1 943.26 an ounce, down 0.3%