(Bloomberg) — Asian stocks fluctuated to start the week, with investors fretting over bond yields and inflation as economic activity accelerates. Turkey’s lira tumbled after the central-bank head was replaced.
S&P 500 futures swung between red and green, and Nasdaq 100 contracts gained as Treasury yields slipped. MSCI Inc.’s Asia Pacific gauge pared losses. Japan underperformed, while shares rose in China and Australia, and were little changed in Hong Kong.
The Turkish lira slumped as much as 15% in early Asian trading after President Recep Tayyip Erdogan removed the central-bank governor following a sharper-than-expected hike in interest rates. The dollar advanced against most Group-of-10 currencies.
A heavy slate of Treasury auctions this week poses a potential catalyst for a renewed rise in bond yields. The ten-year benchmark subsided Monday to 1.68% from the highest levels in about 14 months. Oil steadied after its worst week since October.
Investor concerns about the possibility of higher interest rates are dominating equity and bond markets. Selling in bonds has propelled yields higher in recent weeks and fueled a rotation out of growth into value shares. Inflation expectations have climbed on an improving outlook for growth, which some suspect may force the Fed to tighten monetary policy sooner than its current guidance suggests.
Fed Chairman Jerome Powell reiterated in a Wall Street Journal editorial that the central bank will provide aid to the economy “for as long as it takes.” Richmond Fed President Thomas Barkin said in a Bloomberg TV interview Sunday that there is no sign yet of unwanted inflation pressures.
“Clearly, the market is skeptical that the Fed will be able to keep interest rates at current levels for the next three years,” Diana Mousina, senior economist in the multi-asset group at AMP Capital Investors Ltd., said in a note. “We think that nominal bond yields can still shoot higher in the short-term towards 2% and above on inflation concerns. Markets are likely to worry that this move is permanent, rather than temporary.”
A central-bank exemption that allowed lenders load up on Treasuries and deposits without setting aside extra capital to cushion losses will lapse March 31. The regulator also said it plans further changes to this supplementary leverage ratio, or SLR.
Meanwhile, the European Union is set to block exports of the AstraZeneca Plc vaccine to the U.K. until the drugmaker fulfills its delivery obligations to the bloc. The pound weakened.
These are some key events to watch this week:
Fed Chair Powell is first up Monday at the BIS Innovation Summit, a virtual gathering of major central bankers. He speaks alongside Bundesbank’s Jens Weidmann on progressing with the digital age. The ECB’s Christine Lagarde, BOE’s Andrew Bailey and chiefs of Sweden, Canada, Mexico and Brazil all follow.Powell and Treasury Secretary Janet Yellen are expected to make their first joint appearance before the U.S. House Financial Services committee to testify on Fed and Treasury pandemic policies Tuesday.The U.S. Treasury holds auctions of two-, five- and seven-year debt.EIA crude oil inventory report on Wednesday.Friday, February U.S. personal income and spending data comes in the wake of $600 stimulus checks but before the latest round of $1,400 payments began hitting Americans’ bank accounts.
These are some of the main moves in financial markets:
Stocks
S&P 500 futures were little changed as of 12:20 p.m. in Tokyo. Nasdaq 100 futures rose 0.1%.Topix Index fell 1%.Australia’s S&P/ASX 200 Index gained 0.6%.South Korea’s Kospi Index was little changed.Hang Seng Index fluctuated.CSI 300 Index rose 0.9%.Euro Stoxx 50 futures fell 0.3%.
Currencies
The yen rose 0.2% to 108.73 per dollar.The Bloomberg Dollar Spot Index advanced 0.1%.The euro fell 0.1% to $1.1896.The pound dropped 0.2% to $1.3845.
Bonds
The yield on 10-year Treasuries fell about four basis points to 1.68%.Australia’s 10-year bond yield fell about five basis points to 1.76%.
Commodities
West Texas Intermediate crude fell 0.3% to $61.21 a barrel.Gold fell 0.3% to $1,739.59 an ounce.
(A previous version corrected the extent of the Turkish lira’s decline.)
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