(Bloomberg) — Asian stocks fell Wednesday as investors balanced the risk of stronger growth and inflation driving global rates higher against the Federal Reserve’s pledge of continued policy support. Treasuries were steady.
A gauge of Asian shares declined to the lowest in more than two weeks. Hong Kong equities tumbled on the city’s plan to raise stamp duty on stock trading. U.S. equity futures dipped while European contracts edged higher.
Earlier, the S&P 500 Index reversed losses to close in the green following Fed Chair Jerome Powell’s message Tuesday that the central bank was nowhere close to unwinding its easy policy. Cyclicals outperformed, while the tech heavy Nasdaq 100 closed lower despite a late rally.
Ten-year Treasury yields held just below the one-year high reached on Monday. The dollar was little changed. The New Zealand dollar advanced even as the central bank said “prolonged” stimulus was needed.
Powell voiced cautious expectations for a return to more-normal activity later this year and said that higher bond yields reflected economic optimism, not inflation fears. While that helped assuage investors betting on a global recovery spurred by vaccines and fiscal aid, there are also lingering concerns that stock valuations are stretched.
“The market — while applauding impending fiscal largesse, stronger economic growth, and a markedly more positive earnings outlook — can’t help but wonder whether inflationary pressures will remain ‘transient,’ to use Fed Chairman Jerome Powell’s favorite word,” said Quincy Krosby, chief market strategist at Prudential Financial.
Money-market traders have pulled forward their rate-hike expectations since the start of this year, and now see the Fed raising interest rates a quarter point by the middle of 2023.
Commodities stabilized after their recent run-up, with the Bloomberg Commodity Spot Index just shy of its highest level since 2013. Elsewhere, Bitcoin rallied back above $50,000 after a bout of volatility highlighted lingering doubts about the durability of the token’s gains.
Some key events to watch this week:
EIA crude oil inventory report is out Wednesday.Finance ministers and central bankers from the Group of 20 will meet virtually Friday. U.S. Treasury Secretary Janet Yellen will be among the attendees.
These are some of the main moves in markets:
Stocks
S&P 500 futures fell 0.1% as of 1:53 p.m. in Tokyo. The S&P 500 index rose 0.1% on Tuesday.Japan’s Topix index dipped 1.3%.South Korea’s Kospi index fell 1.1%.Australia’s S&P/ASX 200 Index shed 0.8%.Hong Kong’s Hang Seng Index tumbled 1.9%.Euro Stoxx 50 futures added 0.2%.
Currencies
The yen fell 0.2% to 105.50 per dollar.The offshore yuan was at 6.4628 per dollar.The Bloomberg Dollar Spot Index was little changed.The euro bought $1.2149.The pound jumped 0.4% to $1.4162.
Bonds
The yield on 10-year Treasuries fell about one basis point to 1.33%.Australia’s 10-year bond yield rose three basis points to 1.60%.
Commodities
West Texas Intermediate crude fell 0.8% to $61.15 a barrel.Gold was up 0.2% at $1,809.20 an ounce.
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