Futures, stocks fall as yields rise; Dollar gains: market closure

U.S. futures and Asian equities fell on Tuesday as investors worried that soaring borrowing costs could dent growth in undervalued risk assets. The dollar rose and the yen fell to its lowest level in 20 years.

A surprise half-point interest rate hike in Australia highlighted how inflation is a major issue for central bankers. MSCI Inc.’s Asia-Pacific stock gauge fell the most in more than a week.

Equities in Japan pared their gains, but the currency’s slide on a widening interest rate differential with the United States provided a tailwind for exporters. Australia’s three-year yields soared and stocks fell as the Reserve Bank of Australia blindsided the market with an outsized hike to fight rising costs. Chinese tech stocks fell as traders sought to clarify the government’s regulatory stance. European futures fell.

Asian currencies fell and the dollar gauge hit its highest level in more than two weeks. Treasury yields edged higher after 5- and 10-year yields jumped more than 3% for the first time since mid-May ahead of fresh debt offering ahead of crucial inflation data at the end of the week.

Investors are risk averse and volatility remains high. Stocks are struggling to mount a lasting rebound amid fears that policymakers must be even more aggressive in their withdrawal of stimulus to contain inflation, hurting the economy and corporate earnings. The US jobs report released on Friday validated the Federal Reserve’s aggressive monetary tightening trajectory, while the surge in yields is shaping up to be a headwind for sentiment.

“We’re going to continue to bounce back through the summer,” Julie Biel, portfolio manager and senior research analyst at Kayne Anderson Rudnick, told Bloomberg Radio. “Overall, people are trying to figure out a direction, how are we going to land this economy without a recession, this so-called soft landing.”

The RBA responded to price pressures with its biggest rate hike in 22 years – predicted by just three of 29 economists – and signaled it remained committed to “doing what is necessary” to contain inflationary pressures.

On Thursday, the European Central Bank is expected to announce an end to bond purchases this week and officially kick off the countdown to higher borrowing costs in July, joining global counterparts in tightening monetary policy amid high inflation. .

Key events to watch this week:

  • World Bank’s “Global Economic Prospects” report on Tuesday
  • Reserve Bank of India rate decision on Wednesday
  • OECD Economic Outlook, a bi-annual analysis of key global economic trends and prospects for the next two years. Wednesday
  • European Central Bank rate decision, briefing by Christine Lagarde, Thursday
  • China trade, new yuan loans, money supply, global financing. Thursday
  • US CPI, University of Michigan Consumer Sentiment Friday
  • China CPI, Friday PPI

Some of the major movements in the markets:

Shares

  • S&P 500 futures fell 0.5% at 7:29 a.m. in London. The S&P 500 rose 0.3%
  • Nasdaq 100 futures lost 0.7%. The Nasdaq 100 rose 0.4%
  • The Topix index rose 0.4%
  • The Australian S&P/ASX 200 index lost 1.6%
  • The Kospi index fell 1.7%
  • The Hang Seng index lost 0.9%
  • The Shanghai Composite Index was little changed
  • Euro Stoxx 50 futures fell 0.7%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.3%
  • The Japanese yen fell 0.7% to 132.82 per dollar
  • The offshore yuan was at 6.6759 to the dollar, down 0.3%
  • The euro was at $1.0675, down 0.2%

Obligations

  • The yield on 10-year Treasury bills was 3.05%
  • The Australian 10-year bond yield rose six basis points to 3.55%. The three-year yield jumped 15 basis points to 3.12%.

Goods

  • West Texas Intermediate was at $119.22 a barrel, up 0.6%
  • Gold was at $1,840 an ounce

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