Asian stocks looked set to drop after U.S. shares fell from a record, oil slumped and Treasury yields touched the highest levels in more than a year amid concern the Federal Reserve will allow inflation to accelerate.
Oil plunged more than 9% at one point in part on concerns that new virus-related curbs in Europe will sap demand. A spike in U.S. Treasury yields drove the 10-year benchmark to 1.75% for the first time since January 2020. Australian yields rose in early trade.
The rise in U.S. rates dented demand for technology shares with high valuations, sending the Nasdaq 100 Index tumbling 3.1%. The S&P 500 Index closed down 1.5%. Equity futures pointed lower in Japan, Hong Kong and Australia.
Traders were also bracing for quadruple witching Friday, a major expirations of options and futures contracts that can exacerbate swings in asset prices.
“We’re seeing a pattern where an uncomfortable spike in the 10-year Treasury reminds equity investors that their tech stocks are trading well above average,” said Mike Bailey, director of research at FBB Capital Partners.
Fed Chairman Jerome Powell’s apparent willingness to keep pumping support into the economy and let it run hotter has spurred bets on faster inflation, sending market expectations of price pressures to multi-year highs. Across the Atlantic, France locked down regions including Paris to fight the pandemic, spurring leading to fresh doubts about the speed of Europe’s recovery as the region struggles to roll out vaccines.
Investor focus will also be on Japan’s central bank decision. The Bank of Japan is expected to tweak its bond yield management and asset purchases after a policy review that could have sizable implications for investors.
Elsewhere, a number of European nations will start using AstraZeneca Plc’s Covid-19 vaccine again after the European Union’s drug regulator endorsed it as safe. In Alaska, senior U.S. and Chinese officials began their first talks since Joe Biden became president.
These are some key events this week:
- Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing.
These are some of the moves in markets:
- The S&P 500 Index sank 1.5%.
- The Nasdaq 100 Index sank 3.1%.
- Nikkei 225 futures were down 1.1%.
- Australia’s S&P/ASX 200 Index futures fell 0.6%.
- Hong Kong’s Hang Seng Index futures dropped 0.7%.
- The yen traded at 108.91 per dollar.
- The offshore yuan was at 6.5079 per dollar.
- The Bloomberg Dollar Spot Index rose 0.5% Thursday.
- The euro was at $1.1917.
- The British pound was at $1.3926.
- The yield on 10-year Treasuries jumped seven basis points to 1.71% Thursday.
- Australia’s 10-year yield rose eight basis points to 1.86%.
- West Texas Intermediate crude fell 7.1% to $60 a barrel.
- Gold was at $1,736.40 per ounce.