(Bloomberg) — Stocks begin the week in the shadow of a jump in benchmark Treasury yields ahead of the Federal Reserve policy meeting. The dollar edged higher in early Asian trading.
Ten-year Treasury yields rose past 1.64% Friday as vaccine campaigns and the $1.9 trillion U.S. stimulus added to concerns about faster inflation amid an economic recovery. Australian 10-year yields jumped on Monday.
Equity futures pointed to a dip in Japan, while Australian shares slipped. S&P 500 and Nasdaq 100 contracts made modest gains. The S&P 500 closed higher Friday amid rallies in financial and industrial shares. The Nasdaq 100 gauge slid and the Dow Jones Industrial Average added to its all-time high.
Elsewhere, oil edged higher and Bitcoin traded around $60,000 after surpassing $61,000 in a meteoric rise.
Markets are preoccupied with rising long-term borrowing costs and their implications for reflation trades and the rotation in the stock market from growth to value shares. The Fed decision later in the week is one of a slew due from central banks in developed and emerging nations.
“It’s not just a question of level, it’s a question of pace,” said Charles-Henry Monchau, who serves as both chief financial and chief investment officer at FlowBank SA. “Are we going to move on the bond yields too quickly too fast for the market to adjust or is it going to be a smooth journey to higher bond yields?” If bond yields rise in an orderly way and are backed by better growth, “you are going to see a continuation of this rotation,” he said.
Treasury Secretary Janet Yellen said U.S. inflation risks remain subdued despite the Biden administration stimulus. A strong recovery from the Covid-19 recession is likely to prompt Fed Chair Jerome Powell and his colleagues to lift interest rates in 2023, but that isn’t going to show up in their forecasts this week, a Bloomberg survey of economists showed.
Fed to Hike Rates in 2023 But Dots Won’t Show It, Economists Say
On the virus front, more countries have suspended the use of AstraZeneca Plc’s vaccine after some concerns around side effects. Most of Italy will return to lockdown on Monday amid a resurgence in infections.
These are some key events this week:
China industrial production and retail sales are due Monday.Fed Chair Jerome Powell will likely reaffirm his no-tightening policy stance at the Fed policy meeting Wednesday.Bank of England rate decision Thursday. BOE is expected to leave monetary policy unchanged.Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing Friday.
These are the main moves in markets:
Stocks
S&P 500 futures rose 0.3% as of 8:41 a.m. in Tokyo. The S&P 500 Index rose 0.1%.Nasdaq 100 futures rose 0.2%. The Nasdaq 100 Index fell 0.9%.Nikkei 225 futures fell 0.2% earlier.Australia’s S&P/ASX 200 Index shed 0.2%.Hong Kong’s Hang Seng Index futures rose 0.2% earlier.
Currencies
The yen was at 109.12 per dollar, down 0.1%.The offshore yuan was at 6.4986 per dollar.The Bloomberg Dollar Spot Index rose less than 0.1%.The euro traded at $1.1948.
Bonds
The yield on 10-year Treasuries increased nine basis points to 1.62% on Friday.Australia’s 10-year bond yield jumped 10 basis points to 1.81%.
Commodities
West Texas Intermediate crude rose 0.5% to $65.96 a barrel.Gold was at $1,726.11 an ounce.
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