Asian Stocks Fall as U.S. Dollar, Treasuries Climb: Markets Wrap

(Bloomberg) — Asian stocks fell Tuesday as Treasuries and the dollar edged higher, with traders monitoring setbacks in the recovery from the pandemic and braced for U.S. auctions that will test demand for bonds.

Equity indexes slipped into the red across the region, with China’s CSI 300 nearing its year-to-date low. U.S. and European equity futures retreated after an overnight rally on Wall Street that saw the Nasdaq 100 outperform the S&P 500, aided by a drop in long-term borrowing costs.

The 10-year U.S. Treasury yield subsided further from the highest in about 14 months amid hopes of improved demand in this week’s heavy round of sales. The offerings include a seven-year note, a maturity that fared poorly in last month’s auction, sending benchmark yields sharply higher.

Oil prices slid and the dollar rose. New Zealand’s currency erased this year’s gains after the government took steps to rein in surging property prices, cooling speculation about central bank rate hikes.

The stabilization in bond yields provided some relief for investors fretting that heavy U.S. spending on the recovery could reignite inflation and force tighter central-bank policy. The Biden administration is considering a multitrillion-dollar economic plan to follow the stimulus package signed earlier this month.

Encouraging economic data shouldn’t distract from the progress still to be made, Treasury Secretary Janet Yellen emphasized in prepared remarks for her Congressional testimony on Tuesday. The Federal Reserve will continue to support the U.S. economy for as long as it takes, Chairman Jerome Powell noted in a speech for his accompanying appearance.

“Risk assets can live with higher yields during the recovery stage,” just not an inflationary spike, said Dwyfor Evans, State Street Global Markets Head of Asia-Pacific Macro Strategy. “We’re not there yet, so this is still really the beginning of this reflationary stage in terms of the business cycle –- that’s what’s driving equities at the moment.”

Elsewhere, Germany faces a hard lockdown over the Easter holiday, as officials seek to reverse the latest wave of Covid-19 infections. The move come amid signs that progress against the pandemic is stalling as global deaths and cases creep higher.

And traders are on alert for possible news from Microsoft Corp., after people familiar with the matter said it’s in talks to acquire Discord Inc., a video-game chat community, for more than $10 billion.

These are some key events to watch this week:

Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell make their first joint appearance before the U.S. House Financial Services committee Tuesday.The U.S. Treasury holds auctions of two-, five- and seven-year debt.EIA crude oil inventory report on Wednesday.U.S. personal income and spending data on Friday.

These are some of the main moves in financial markets:

Stocks

S&P 500 futures dipped 0.2% as of 2:30 p.m. in Tokyo. The index rose 0.7% Monday.Nasdaq 100 futures shed 0.4% after the index gained 1.7%.Japan’s Topix Index was down 0.7%.Australia’s S&P/ASX 200 Index was 0.1% lower.South Korea’s Kospi Index fell 0.9%.China’s CSI 300 dropped 1.3%.Hong Kong’s Hang Seng index fell 1.3%.

Currencies

The yen edged up 0.1% to 108.76 per dollar.The Bloomberg Dollar Spot Index climbed 0.2%.The euro was down 0.1% at $1.1923.The New Zealand dollar fell 1.1% to 70.84 U.S. cents.

Bonds

The yield on 10-year Treasuries dipped two basis points to 1.67%.Australia’s 10-year yield fell three basis points to 1.73%.

Commodities

Gold slipped 0.2% to $1,736 an ounce.West Texas Intermediate crude fell 1% to $60.93 a barrel.

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