Stocks Drop as Treasuries, Crude Oil Hold Losses: Markets Wrap

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(Bloomberg) — Asian stocks weakened Friday after U.S. shares fell from a record, with Treasury yields hovering around the highest levels in over a year as the Federal Reserve’s tolerant stance on inflation unnerved investors.

Japan’s Topix pared losses and the Nikkei 225 sank after the Bank of Japan said it will focus purchases of exchange-traded funds on the former gauge. Chinese shares slumped as chilly U.S.-China talks soured the mood. U.S. stock futures fluctuated after the Nasdaq 100 slid 3.1% and the S&P 500 fell 1.5%.

U.S. Treasury yields steadied after a spike drove the 10-year benchmark to 1.75% for the first time since January 2020. Crude prices struggled following a 7% plunge that owed partly to concerns that new virus-related curbs in Europe will sap demand. The dollar held its gains from the prior day.

The Bank of Japan’s policy decision included a widening of the flexible trading band to 25 basis points either side of its 0% target for the 10-year yield. Government bonds and the yen were little changed on the announcement.

Fed Chair Jerome Powell’s willingness to let the U.S. economy run hotter with central bank support has spurred bets on faster inflation, sending market expectations of price pressures to multi-year highs. Across the Atlantic, France announced a lockdown of areas including Paris to fight the pandemic, casting a cloud over Europe’s outlook amid an uneven vaccine roll out.

“Economic recovery is on its way and we have central banks around the world very committed to easy monetary policy,” said Jun Bei Liu, portfolio manager at Tribeca Investment Partners, who sees value stocks benefiting. “All of that together will indicate this is just short-term profit-taking and the underlying fundamentals of the equity market are looking very strong.”

Traders were also bracing for quadruple witching Friday, a major expiration of options and futures contracts that can exacerbate swings in asset prices. Elsewhere, a number of European nations will start using AstraZeneca Plc’s Covid-19 vaccine again after Europe’s drug regulator declared it safe.

These are some of the moves in markets as of 2:50 p.m. in Tokyo:

Stocks

S&P 500 futures gained 0.1%, after the benchmark closed down 1.5%.Nasdaq 100 Index futures edged down 0.1%. The index fell 3.1%.The Shanghai Composite Index fell 1.7%.Hong Kong’s Hang Seng Index slipped 1.9%Japan’s Topix Index was little changed.Japan’s Nikkei 225 Index fell 1.6%.Australia’s S&P/ASX 200 Index fell 0.6%.Euro Stoxx 50 futures slid 0.9%

Currencies

The yen was at 108.89 per dollar.The offshore yuan was down 0.1% to 6.5152 per dollar.The Bloomberg Dollar Spot Index was little changed.The euro was at $1.1916.

Bonds

The yield on 10-year Treasuries dipped one basis point to 1.69%.Australia’s 10-year yield was about two basis points higher at 1.80%.

Commodities

West Texas Intermediate crude was at $59.99 a barrel.Gold slipped 0.1% to $1,734.54 per ounce.

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