(Bloomberg) — Global bonds continued to sell off and Asian stocks retreated after a bruising session for U.S. shares and Treasuries on Thursday. The dollar strengthened.
Australian bonds slumped and Japan’s 10-year yield rose to its highest since early 2016. Treasuries fluctuated in early Asian trading. Earlier, a poorly received Treasury auction saw the 10-year benchmark surge as much as 23 basis points to 1.6%. The selloff accelerated as holders of mortgage securities were forced to offload government bonds.
Stocks fell more than 2% in Japan, Australia and South Korea. S&P 500 futures pointed lower after the benchmark closed down 2.5% with tech shares leading losses. The Nasdaq 100 tumbled 3.6%, the most since October, as investors rotated away from pandemic-era winners toward companies poised to benefit from an end to lockdowns. Still, stocks popular with the day-trader crowd surged once again, with GameStop Corp. doubling at one point before ending 19% higher.
While investors are betting on a sunnier outlook for the global economy, some traders worry inflation may accelerate, triggering a pullback in easy monetary policy. Federal Reserve officials so far say surging Treasury yields reflect optimism and have stressed that the central bank has no plans to tighten policy prematurely.
“It’s all about interest rates,” said Randy Frederick, vice president of trading and derivatives for Schwab Center for Financial Research. Tech “has been a relative outperformer. As it led on the way up, it will likely lead on the way down too.”
The 10-year U.S. yield adjusted for inflation rose to its highest level since June, a warning sign for riskier assets that have benefited from exceptionally loose financial conditions amid the pandemic.
In remarks this week, Federal Reserve Chairman Jerome Powell offered reassurance that policy would continue to be supportive and look beyond a temporary pick-up in inflation, especially from a low base. Nevertheless, money-market traders have now almost fully priced in a first rate hike by the end of next year.
Read more: Soaring U.S. Yields Send Risk Assets Warning as Real Rates Rise
Elsewhere, oil retreated from its the highest in more than a year as traders mulled depleting global inventories. Bitcoin traded below $50,000 again. Gold was steady after an overnight decline.
Some key events to watch this week:
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 0.4% at 9:37 a.m. in Tokyo. The S&P 500 Index fell 2.5%.Japan’s Topix Index fell 2%.S&P/ASX 200 fell 2.3%.South Korea’s Kospi Index fell 2.9%.
Currencies
The Bloomberg Dollar Spot Index rose 0.1% after gaining 0.6% Thursday.The euro fell 0.2% to $1.2149.The British pound fell 0.3% to $1.3972.The Japanese yen weakened 0.1% to 106.26 per dollar.The offshore yuan fell 0.2% to 6.5022 per dollar.
Bonds
The yield on 10-year Treasuries slipped one basis point to 1.51%.Australia’s 10-year yield jumped 15 basis points to 1.88%.
Commodities
West Texas Intermediate crude fell 0.5% to $63.19 a barrel.Gold was little changed at $1,769 an ounce.
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