Asia Stocks Mixed Amid Treasury Slide; Yen Sinks: Markets Wrap
- Five- and 10-year yields top 3% for the first time since May
- Yen at two-decade low; dollar gains as Asia currencies decline
Stocks in Asia were mixed Tuesday in choppy trading as investors assessed the impact of a jump in Treasury yields on the outlook for earnings and the economy. The yen sank to a 20-year low.
Equities in Japan rose as the currency’s plunge on a widening interest-rate gap with the US provided a tailwind for exporters. Australia’s three-year yields soared and stocks extended a decline on a bigger-than-expected half-point hike by the central bank. China technology stocks fluctuated as traders sought clarity on the government’s regulatory stance. Hong Kong was steady and China rose. US and European futures dropped.
Asian currencies tumbled and the dollar gained as investors fled risk assets, including Bitcoin, which fell back below the $30,000 mark.
Treasuries were mostly steady after losses that sent five- and 10-year yields over 3% for the first time since mid-May ahead of a slew of new debt supply before crucial inflation data at the end of the week. The 10-year Treasury yield jumped more than 10 basis points as yields across the curve advanced at least seven basis points Monday.
Investors are reluctant to take on risk and volatility remains elevated. Equities are struggling to mount a sustainable rebound amid fears rising borrowing costs will hurt growth and corporate earnings. The US jobs report on Friday validated the Federal Reserve’s aggressive monetary tightening path, while surging yields are shaping up as a headwind for sentiment.
“We are going to continue to bounce back and forth through the summer,” Julie Biel, portfolio manager and senior research analyst at Kayne Anderson Rudnick, said on Bloomberg Radio. “Overall, people are trying to find some sense of direction, just how we are going to land this economy without a recession, this so-called soft landing.”
The Reserve Bank of Australia’s decision highlighted just how big a problem inflation is for central bankers. It responded to price pressures with its 50-basis-point hike -- predicted by just three of 29 economists.
The European Central Bank is set to announce an end to bond purchases this week and formally begin the countdown to an increase in borrowing costs in July, joining global peers tightening monetary policy in the face of hot inflation.
Key events to watch this week:
- World Bank’s “Global Economic Prospects” report Tuesday
- Reserve Bank of India rate decision Wednesday
- OECD Economic Outlook, a twice-yearly analysis of major global economic trends and prospects for the next two years. Wednesday
- European Central Bank rate decision, Christine Lagarde briefing, Thursday
- China trade, new yuan loans, money supply, aggregate financing. Thursday
- US CPI, University of Michigan consumer sentiment Friday
- China CPI, PPI Friday