Asia Stocks Trade Lower; Treasuries, Dollar Steady: Markets Wrap

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(Bloomberg) — Asian stocks opened mostly weaker Tuesday after the S&P 500 closed lower for a fifth session, though a late U.S. rebound may tame losses. Treasuries and the dollar were steady.

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Japan shares dipped after a holiday, while Australia also fell and South Korea rose. U.S. contracts fluctuated after the S&P 500 posted its longest losing streak since September, though dip buyers emerged to wipe out almost all its losses after sinking 2%. The Nasdaq 100 ended in the green after sliding as much as 2.7%.

The U.S. Treasury curve flattened as short-dated yields rose sharply with market-implied odds of a March rate hike edging higher. Goldman Sachs Group Inc. predicted four hikes this year, beginning that month. The 10-year Treasury yield was at 1.76%.

A key measure of U.S. inflation — set to be released Wednesday — is anticipated to have increased further in December, putting additional pressure on the central bank to tighten policy.

Investors are mulling the impact of a withdrawal of unprecedented stimulus and the spread of omicron virus that continues to pressure already buckling supply chains and add to inflationary pressures. A drop in liquidity has sparked a rotation out of pricey growth stocks into laggard value names.

“We think eventually this market will shift back toward growth, but we still got some wood to chop there; the valuations haven’t corrected,” Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, said on Bloomberg Television. “This is a repricing, it’s painful, it has a little bit more ways to go.”

Federal Reserve Chair Jerome Powell said the U.S. economy was expanding at a fast pace and the central bank will prevent higher inflation from becoming entrenched. In remarks for his Senate confirmation hearing, he also cautioned that the post-pandemic economy might look different than the previous expansion.

Helping sentiment, New York’s virus infections may have reached a peak, about a month after the first case of the omicron variant was identified there. Meanwhile, Pfizer Inc. is developing a hybrid vaccine that shields against the omicron variant. A new study showed high levels of protective immune cells that fight some common colds also made people less likely to contract Covid-19.

Elsewhere, Bitcoin recovered to around $42,000 after dipping below $40,000, putting it on track for its worst start to a year since the earliest days of digital currencies. Oil edged up.

Here are some key events this week:

  • Fed Chair Jerome Powell’s confirmation hearing in the Senate Banking Committee on Tuesday.

  • Kansas City Fed President Esther George and St. Louis Fed President James Bullard speak on Tuesday.

  • EIA crude oil inventory report on Wednesday.

  • China PPI, CPI on Wednesday.

  • U.S. CPI, Fed Beige Book on Wednesday.

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

  • U.S. Senate Banking Committee hearing for Lael Brainard, nominated as Fed vice-chair on Thursday.

  • Richmond Fed President Thomas Barkin, Philadelphia Fed President Patrick Harker,

  • Chicago Fed President Charles Evans speak on Thursday.

  • Bank of Korea policy decision and briefing on Friday.

  • Wells Fargo, Citigroup, JPMorgan due to report earnings on Friday.

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

  • New York Fed President John Williams speaks Friday.

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

  • S&P 500 futures were little changed as of 9 a.m. in Tokyo. The S&P 500 fell 0.1%

  • Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 0.1%

  • Topix index fell 1%

  • Australia’s S&P/ASX 200 Index fell 0.6%

  • Kospi index rose 0.2%

  • Hang Seng Index futures fell 0.4% earlier

Currencies

  • The Japanese yen was at 115.28 per dollar

  • The offshore yuan was at 6.3809 per dollar

  • The Bloomberg Dollar Spot Index was steady

  • The euro traded at $1.1330

Bonds

Commodities

  • West Texas Intermediate crude rose 0.4% to $78.57 a barrel

  • Gold was at $1,801.35 an ounce

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