Saturday, January 22

Stocks tumble as yields signal inflation concerns: markets wind down


Asian stocks fell on Wednesday as rising bond yields stoked inflation fears and the China Evergrande Group debt crisis intensified.

MSCI Inc.’s Asian Stocks gauge had the biggest drop in nearly six weeks, heading for its first quarterly decline in six. Japan fell, although it cut some losses, as it was counting for a new leader for the ruling party. China fell as the debt crisis deepened at China Evergrande Group.

U.S. futures advanced after the S&P 500 fell further since May, and concerns about the debt ceiling stagnation in Washington added to investor distress. The Nasdaq 100 slumped further since March as tech stocks underperformed amid soaring Treasury yields. Treasuries stabilized after the yield on the 30-year note rose nearly 10 basis points. WTI crude fell back and Brent fell back from a three-year high. The dollar maintained gains.

During a Senate hearing, Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen warned that a US default because the debt ceiling was not raised would have catastrophic consequences. Republicans blocked a Democratic move in the Senate to raise the debt limit.

Senator Elizabeth Warren’s heated comments weighed on the markets as well. After criticizing Powell for his record on financial regulation, Warren said he is a “dangerous man to head the Fed” and that is why he will oppose his appointment.

A global rally in equities has stalled as investors are reeling from rising energy costs at the same time as central banks are laying down plans to withdraw some of the pandemic stimulus. US consumer confidence fell in September for the third month in a row, suggesting that concerns about the delta variant and higher prices continue to dampen sentiment.

“Part of the reason American markets have been so strong and for so long is because of the complacency that inflation is gone and that central banks can keep interest rates low for a long time,” Belita said. Ong, president of Dalton Investments, on Bloomberg Television. “So many things are changing: the pandemic is not over, the supply chain bottlenecks that we are seeing are affecting all kinds of prices and we will need to see how it plays out because the results are not clear in terms of inflation.”

In the latest Evergrande news:

  • The developer is selling a stake in its regional bank for around 10 billion yuan ($ 1.5 billion) while offloading assets to tackle its debt crisis.
  • He is facing another bond interest payment after showing no sign of paying a separate one last week.
  • Evergrande’s incumbent Chinese Estates suspends operations in Hong Kong.
  • Fitch Ratings lowered the credit rating to C from CC, one level above the equivalent default level, to reflect “that Evergrande is likely to have defaulted on the interest on the senior unsecured notes.”

Elsewhere, the pound traded around its lowest level since January, as higher rate expectations were offset by rising energy prices and panic buying that keep investors wary. Bitcoin was trading below $ 42,000.

Here are some events to watch this week:

  • Japan’s ruling party votes to elect its leader on Wednesday.
  • Central bank heads Andrew Bailey (BOE), Haruhiko Kuroda (BOJ), Christine Lagarde (ECB) and Jerome Powell (Fed) take part in a panel at the ECB Forum on Wednesday.
  • House Financial Services Committee hearing on the Fed, the Treasury’s response to a pandemic, Thursday.
  • China Caixin Manufacturing PMI, Non-Manufacturing PMI, Thursday.
  • Michigan Univ. Of Sentiment, ISM Manufacturing, US Construction Spending, Personal Income / Spending, Friday.

Some of the main movements in the markets:

Stocks

  • S&P 500 futures were up 0.5% at 1:11 pm in Tokyo. The S&P 500 fell 2%
  • Nasdaq 100 futures were up 0.5%. The Nasdaq 100 fell 2.9%
  • The Topix index fell 2.5%
  • Australia’s S & P / ASX 200 Index fell 1.2%
  • The Kospi index fell 2%
  • The Hang Seng Index fell 0.5%
  • The Shanghai Composite Index lost 1.8%

Currencies

  • The Japanese yen was at 111.49 per dollar
  • The offshore yuan was at 6.4703 to the dollar.
  • The Bloomberg Dollar Spot Index was little changed
  • The euro is trading at $ 1.1684

Captivity

  • The 10-year Treasury yield was 1.53%.
  • Australia’s 10-year bond yield rose one basis point to 1.49%

Raw Materials

  • West Texas Intermediate crude fell 1.5% to $ 74.15 a barrel
  • Gold was at $ 1,739.82 an ounce, up 0.3%.

© 2021 Bloomberg


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