Asian stocks are poised for a cautious start to the week with investors concerned about rising bond yields and inflation as economic activity recovers. Turkey’s lira plummeted after the head of the central bank was replaced.
US equity futures fell. Futures fell in Japan and Australia and were higher in Hong Kong previously. the Turkish lira plummeted up to 15% in early Asian trade after President Recep Tayyip Erdogan removed the governor of the central bank after a larger-than-expected increase in interest rates. The dollar advanced against most of the Group of 10 currencies.
The S&P 500 Index fell on Friday. The financial sector weighed down the Dow Jones Industrial Average after the Federal Reserve let a capital breakdown for big banks expire. The tech-heavy Nasdaq 100 rebounded from Thursday’s slide. Oil fell after its worst week since October.
A heavy treasury slate Auctions on maturities that have taken a beating recently will keep the bond market on edge this week. Ten-year yields ended last week above 1.7%, at the highest levels in about 14 months.
Investor concerns about the possibility of higher interest rates are dominating the equity and bond markets. The bond sale has driven yields higher and fueled a growth rotation toward value stocks, in the view that the rebound in inflation may force the Fed to tighten monetary policy sooner than its current stance 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 is needed.”
“Clearly, the market is skeptical that the Fed can keep interest rates at current levels for the next three years,” said Diana Mousina, senior economist at the multi-Asset group in AMP Capital Investors Ltd. said in a note. “We believe that nominal bond yields may still skyrocket further in the short term toward 2% and more due to inflation concerns. Markets are likely to be concerned that this move is permanent, rather than temporary. “
A central bank exemption that would allow lenders to load Treasuries and deposits without setting aside additional capital to cushion losses expires March 31. The regulator also said it will soon propose further changes to this supplemental leverage ratio, or SLR.
Meanwhile, the European Union is prepared to block exports of the AstraZeneca Plc vaccine to the UK until the pharmaceutical company meets its delivery obligations to the block. The pound was weaker.
These are some key events to watch this week:
- Fed Chairman Powell is the first to attend the BIS Innovation Summit on Monday, a virtual gathering of top central bankers. Speak with Jens Weidmann from the Bundesbank about progressing in the digital age. They are followed by Christine Lagarde from the ECB, Andrew Bailey from the BOE and the heads of Sweden, Canada, Mexico and Brazil.
- Powell and Treasury Secretary Janet Yellen are expected to make their first joint appearance before the Financial Services committee of the US House of Representatives to testify on the pandemic policies of the Fed and the Treasury on Tuesday.
- EIA Crude Oil Inventory Report on Wednesday.
- Friday, February US personal income and spending data comes in the wake of the $ 600 stimulus checks, but before the latest round of $ 1,400 payments began to affect Americans’ bank accounts.
These are some of the main movements in financial markets:
- S&P 500 futures were down 0.3% at 7:15 am in Tokyo. Nasdaq 100 futures fell 0.4%.
- Nikkei 225 futures fell 0.6% earlier.
- Australian S & P / ASX 200 Index futures fell 0.2% earlier.
- Hang Seng Index futures rose 0.4% earlier.
- The yen was up 0.1% to 108.83 per dollar.
- The Bloomberg Dollar Spot Index advanced 0.1%.
- The euro fell 0.1% to $ 1.1887.
- The Australian dollar fell 0.2% to 77.26 cents.
- The 10-year Treasury yield rose one basis point to 1.72%, the highest in about 14 months.
- The yield on Australia’s 10-year bonds rose one basis point to 1.82%.
- West Texas Intermediate crude fell 0.7% to $ 61.02 a barrel.
- Gold was at $ 1,739.92 an ounce.
(Corrects the extent of the fall of the Turkish lira in paragraph two.)