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Stock Rally Faltering Amid Higher Treasury Yields: Markets Wrap


Stocks in Asia look set for a soft start on Tuesday after a global bounce from a bear market stalled in the US amid a climb in crude oil prices and Treasury yields.

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(Bloomberg) — Stocks in Asia look set for a soft start on Tuesday after a global bounce from a bear market stalled in the US amid a climb in crude oil prices and Treasury yields. 

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Futures fell for Japan and Hong Kong while Australia’s were flat. US contracts fluctuated after the S&P 500 and tech-heavy Nasdaq 100 posted small losses. Periodic institutional portfolio rebalancing is also affecting trading flows. 

China’s bourse has become a bright spot in an otherwise dour backdrop. The CSI 300 is up more than 5% this quarter, compared with a 14% drop in global shares. Central bank Governor Yi Gang vowed to maintain supportive monetary policy to boost the economy’s recovery from Covid and other stresses.

Treasuries fell after weak demand at auctions. The 10-year yield climbed back to around 3.2%. The dollar was little changed. Crude rose toward $110 a barrel — Libya and Ecuador flagged potential output cuts on political unrest.

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Rallies in risk assets have proved fleeting as higher borrowing costs to fight inflation slows economic activity in a slew of nations. Some analysts argue still-bullish earnings estimates are next in line for a reality check.

“This is the risk in full play; we are living through a downside adjustment,” Chris Iggo, chief investment officer of core investments at AXA Investment Managers, wrote in a note. “Covid era valuations — boosted by excess liquidity — have been obliterated, higher bond yields are pressuring equity valuations and there is a risk that the earnings cycle is about to turn down.”  

In the Bavarian Alps, Russia’s war in Ukraine and limiting its profits from rising energy prices have been among the main topics of discussion at a Group of Seven summit.

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G-7 leaders are set to instruct ministers to explore implementing a price cap on Russian gas. The leaders are also expected to mention a mechanism to cap prices on Russian oil in the final communique.

What to watch this week:

  • San Francisco Fed President Mary Daly is interviewed by LinkedIn’s chief economist, Tuesday
  • US GDP, Wednesday
  • ECB President Christine Lagarde, Federal Reserve Chair Jerome Powell, BOE Governor Andrew Bailey and Cleveland Fed President Loretta Mester due to speak at ECB event, Wednesday
  • St. Louis Fed President James Bullard speaks, Wednesday
  • China PMI, Thursday
  • US personal income, PCE deflator, initial jobless claims, Thursday
  • Eurozone CPI, Friday
  • US construction spending, ISM Manufacturing, Friday

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Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.1% as of 7:16 a.m. in Tokyo. The S&P 500 fell 0.3%
  • Nasdaq 100 futures rose 0.2%. The Nasdaq 100 fell 0.8%
  • Nikkei 225 futures fell 0.1%
  • Australia’s S&P/ASX 200 Index futures were flat
  • Hang Seng Index futures fell 0.8%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro was at $1.0584
  • The Japanese yen traded at 135.40 per dollar
  • The offshore yuan was at 6.6905 per dollar

Bonds

  • The yield on 10-year Treasuries advanced seven basis points to 3.20%

Commodities

  • West Texas Intermediate crude rose 0.3% to $109.92 a barrel
  • Gold was at $1,822.45 an ounce

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