Stocks in Asia traded mixed Tuesday as a jump in Treasury yields fueled concerns that rising borrowing costs will weigh on earnings and induce a recession. 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. Australian stocks dipped before a central bank meeting expected to deliver back-to-back rate increases for the first time in 12 years. Technology stocks in Hong Kong advanced on speculation the government may ease a crackdown on the sector. China fluctuated and US futures dropped.
Treasuries added to 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 inched up after jumping more than 10 basis points as yields across the curve advanced at least seven basis points Monday.
The dollar gained as investors shunned risk assets. Bitcoin fell back below the $30,000 mark and the pound trimmed an advance spurred by UK Prime Minister Boris Johnson surviving a leadership vote.
Equities are struggling to mount a sustainable rebound amid fears rising borrowing costs will hurt growth and corporate earnings, while volatility is expected to remain elevated. The US jobs report on Friday validated the Federal Reserve’s aggressive monetary tightening path, while surging yields are a potential 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 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.
Some of the main moves in markets:
- S&P 500 futures fell 0.2% as of 10:25 a.m. in Tokyo. The S&P 500 rose 0.3%
- Nasdaq 100 futures lost 0.4%. The Nasdaq 100 rose 0.4%
- Topix index rose 0.8%
- Australia’s S&P/ASX 200 Index lost 0.6%
- Kospi index fell 0.9%
- Hang Seng Index little-changed
- Shanghai Composite Index rose 0.4%
- The Bloomberg Dollar Spot Index rose 0.3%
- The Japanese yen fell 0.6% to 132.72 per dollar
- The offshore yuan was at 6.6756 per dollar, down 0.3%
- The euro was at $1.0675, down 0.2%
- The yield on 10-year Treasuries was at 3.05%
- Australia’s 10-year bond yield rose more than two basis points to 3.51%
- West Texas Intermediate was at $119.40 a barrel, up 0.8%
- Gold was at $1,838.72 an ounce