Asian Stocks Rise as Longer Term Yields Hold Drop: Markets Wrap

(Bloomberg) — Asian stocks rose Thursday as longer term Treasury yields and the dollar held declines after Federal Reserve minutes affirmed a looming reduction in pandemic-era stimulus amid inflationary pressures.

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Equities climbed in Australia and South Korea and fluctuated in Japan. U.S. futures advanced after Wall Street snapped a three-day losing streak, with the tech-heavy Nasdaq 100 outperforming the S&P 500.

A key part of the Treasury yield curve flattened to near a one-year low. Annual U.S. inflation held above 5% and the Fed minutes signaled a tapering of bond purchases beginning mid-November or mid-December. Meanwhile, a 30-year auction drew strong demand.

Crude oil stabilized above $80 a barrel and gold was around the highest in nearly a month. In Singapore, the central bank unexpectedly tightened monetary policy settings to tackle cost pressures. Upcoming China inflation figures will offer a window on the impact of supply chain disruptions and a jump in energy prices.

Investors continue to evaluate the resilience of the economic recovery from the pandemic to the surge in inflation and the prospect of reduced central bank policy support. In the earnings season so far, executives at S&P 500 companies mentioned the phrase “supply chain” about 3,000 times on investor calls as of Tuesday — far higher than last year’s then-record figure.

“The big question will be how companies are able to handle the myriad of inflationary pressures from an earnings perspective,” Steve Chiavarone, portfolio manager at Federated Hermes, said in an email. “Wage pressure, labor shortages, supply chain disruptions, higher input costs, surging energy prices amid a global energy crunch, along with the likelihood of higher interest and tax expenses may be too much for firms to digest.”

The Biden administration is trying to relieve supply-chain bottlenecks ahead of the Christmas shopping season, but officials acknowledge their options are limited.

Meanwhile, former Treasury Secretary Lawrence Summers castigated U.S. monetary policy makers for paying too much attention to social issues and not enough to the biggest risk to inflation since the 1970s.

In cryptocurrencies, Bitcoin has resumed its rally, taking the largest token above $57,000. Elsewhere, Hong Kong markets are shut Thursday for a holiday.

Here are a few events to watch this week:

  • Bank of America Corp., Morgan Stanley and Citigroup Inc. report earnings on Thursday

  • U.S. initial jobless claims, PPI on Thursday

  • Goldman Sachs Group Inc. reports earnings on Friday

  • U.S. business inventories, University of Michigan consumer sentiment, retail sales on Friday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.3% as of 9:10 a.m. in Tokyo. The S&P 500 rose 0.3%

  • Nasdaq 100 futures increased 0.4%. The Nasdaq 100 rose 0.8%

  • Japan’s Topix index was steady

  • South Korea’s Kospi added 0.9%

  • Australia’s S&P/ASX 200 Index gained 0.8%

Currencies

  • The Japanese yen was at 113.31 per dollar

  • The offshore yuan traded at 6.4289 per dollar

  • The Bloomberg Dollar Spot Index was steady

  • The euro traded at $1.1598

Bonds

Commodities

  • West Texas Intermediate crude was at $80.82 a barrel, up 0.5%

  • Gold was at $1,791.84 an ounce

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