Asian stocks were mixed Wednesday and Treasuries pared a decline as investors mulled a surprise U.S. inflation jump that stirred the debate on how long Federal Reserve policy can stay ultra-loose.
Shares fluctuated in Japan and dipped in Hong Kong and China. U.S. futures were steady after the S&P 500 slipped for the first time in three trading sessions, while the Nasdaq 100 ended little changed. Traders are digesting a release showing the highest U.S. inflation since 2008, as well as mixed earnings reports from JPMorgan Chase & Co. and Goldman Sachs Group Inc.
The Treasury yield curve was volatile Tuesday. A flattening move following the inflation data reversed as weak demand at a 30-year bond auction drove yields on this maturity higher. The rate on the 10-year U.S. Treasury eased to about 1.4% Wednesday and the dollar trimmed earlier gains.
The New Zealand dollar jumped after the country’s central bank said it would end quantitative easing this month, reducing stimulus.
The June U.S. inflation print topped all forecasts and pointed to higher costs associated with the reopening from the pandemic. Fed officials have said they expect such pressures to be transitory but some commentators see a risk of more durable increases that could force a quicker-than-expected reduction in stimulus. Traders will be scrutinizing testimony due from Fed Chair Jerome Powell this week.
“The debate is centered around where will inflation settle when things normalize about a year from now -- is it north of 2% or south of 2%?” Jimmy Chang, chief investment officer at Rockefeller & Co., said on Bloomberg Television, adding he expects Powell to sound “fairly dovish.”
Investors are also weighing the prospects for increased U.S. government spending. Senate Democrats on the Budget Committee have agreed to set a top line of $3.5 trillion for a bill to carry most of President Joe Biden’s economic agenda into law without Republican support.
Concerns about the growth impact of the coronavirus persist, however, as the spread of the more contagious delta variant hampers the recovery in parts of the world. The earnings season is key too, with global stocks close to record highs on optimism over the bounce back from the health crisis.
Oil edged lower after touching the highest price in more than 2 1/2 years. The prospect of an imminent flood of crude exports from Iran and other major producers has waned, and the International Energy Agency has warned of a deepening supply crunch.
Ariel Investments Chairman and co-CEO John Rogers sees “more than a little froth” in markets and says it is a time for caution in equities as rates will be “significantly higher” than anticipated.
Source: Bloomberg
For more market commentary, follow the MLIV blog.
Here are some events to watch this week:
- Bank of Korea monetary decision Thursday
- China second-quarter GDP, key economic indicators Thursday
- Federal Reserve Chair Jerome Powell appears before the Senate Banking Committee to deliver the semi-annual Monetary Policy Report to Congress Thursday
- Bank of Japan interest rate decision Friday
These are some of the main moves in financial markets:
Stocks
- S&P 500 futures were steady as of 10:53 a.m. in Tokyo. The S&P 500 fell 0.4%
- Nasdaq 100 futures rose 0.1%. The Nasdaq 100 was little changed
- Japan’s Topix index rose 0.1%
- Australia’s S&P/ASX 200 Index rose 0.4%
- South Korea’s Kospi index fell 0.3%
- Hong Kong’s Hang Seng Index lost 0.4%
- China’s Shanghai Composite Index dipped 0.6%
Currencies
- The Japanese yen was at 110.52 per dollar, up 0.1%
- The offshore yuan was at 6.4794 per dollar
- The Bloomberg Dollar Spot Index dipped 0.1%
- The euro traded at $1.1779
Bonds
- The yield on 10-year U.S. Treasuries dipped about two basis points to 1.40%
- Australia’s 10-year bond yield rose three basis points to 1.35%
Commodities
- West Texas Intermediate crude dropped 0.1% to $75.16 a barrel
- Gold was steady at $1,808.86 an ounce
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Stock Market Today: Dow, S&P Live Updates for Jul. 14, 2021 - Bloomberg
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