Stocks pause for breath as Bond Selloff

SYDNEY / NEW YORK (Reuters) – Stocks breathed a sigh of relief on Tuesday, falling to record highs as political turmoil in Washington and rising cases of coronovirus brought to a halt, though a repurchase in the US Treasury led investors to large Trusted spending government.

FILE PHOTO: Pedestrians wearing facial masks depict stock prices outside a brokerage on January 30, 2020 in Tokyo, Japan on an electric board. REUTERS / Kim Kyung-Hoon

The yield on the benchmark US government’s 10-year debt, when prices fall, yields as high as 2.4 basis points, pointing to a fresh ten-month high of 1.1580%. [US/]

MSCI’s largest index of Asia-Pacific shares outside Japan fell 0.5% after touching an all-time high on Monday, with some gains made by investors as South Korea fell 2.6%. [.KS]

Japan’s Nikkei reached a three-decade high after drug makers reported another effective COVID-19 treatment, although the index dropped to 0.16% in the afternoon. [.T]

The strong current helped Chinese blue chips to grow 1.11% higher. [.SS]

S&P 500 futures were down 0.05% and London’s FTSE futures were down 0.13% in Asia on Tuesday.

A major US dollar has closed for a four-day gain against other major currencies, holding the euro and the multi-week close to the yen. [FRX/]

“We have seen a very strong week or so (in equities) and I think the lower moves we are seeing are a little more profitable,” said Chad Padowitz, chief investment officer at Talaria Capital in Melbourne.

“I don’t think high interest rates or inflation expectations are a concern for equities at the moment.”

Political uncertainty hurt the mood somewhat as Democrats proposed impeachment of US President Donald Trump, accusing him of instigating the rebellion following a violent attack on the Capitol last week.

Overnight, Nasdaq led minor losses on Wall Street, falling 1.3% as investors sold out to tech giants who have taken action against Trump and his supporters. [.N]

Twitter dropped 6.4% on Monday after permanently suspending Trump’s account last Friday.

short squeeze

US yields continue to decline as investors expect a larger spending spree, after Democrats last week won a major United States government control of both houses of Congress.

The yield on US 10-year debt is already 23 basis points this year and the spread between two-year and 10-year treasury yields is now over 100 basis points for the first time since July 2017.

“The Treasury has gone back to March levels,” said Mark Berrado CIO of Darling Macron in Sydney.

“What’s different between now and then obviously is the situation around COVID, the Fed’s policy and the major thing has been the new government in the US, but some of those other factors can reassure themselves in the short term.”

The huge and sudden sell-off has supported equities, tapping the break at short dollar positions. With a renewed focus on inflation expectations, investors will have to take a closer look at the US CPI data on Wednesday.

Meanwhile, the dollar index bounced back to a nearly three-year low from 1.5% the previous week as investors trim what has become a much larger position.

Elsewhere, investors are hoping to see the extent to which the rebound in 2021 earnings can be seen and the results of the JP Morgan, Citi and Wells Fargo results and conference calls on Friday have hurt the economy.

US crude was slightly lower at $ 52.16 per barrel and Brent was 0.22% lower at $ 55.54. [O/R]

Gold that has been sold as US yields because it pays no interest is stable at $ 1,850 an ounce. [GOL/]

Reporting by Paulina Duron in Sydney and Chibiku Ogah in New York. Writing by Tom Westbrook; Editing by Sam Holmes and Lincoln Fiesta


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