SYDNEY (Reuters) – Asian stocks took a breath on Monday as treasury yields peaked at a 10-month high as trillions were to be introduced this week in new US fiscal stimulus plans, boosting global reflationary trade.
Investors have been watching US policy closely as pressure to impeach President Donald Trump grows, although there are signs that the actual process may take some time.
South Korea failed after an early jump, and Chinese blue chips solidified 0.7%.
“Asia has gone through the second global crisis this millennium with its powers,” said ANZ chief economist Richard Yetzenga.
“Asia’s growth is stronger, with much better demographics and debt levels than advanced economies.”
He noted a reversal in the fate of the semiconductor and energy sectors, highlighting Asia’s success, given that the region produces about 45% of the world’s semiconductors.
“For the first time, the market capitalization of the global semiconductor sector has surpassed energy,” he said. “During the last crisis, 12 years ago, the energy sector was more than five times bigger.”
S&P 500 futures slipped 0.6% from all-time highs after gaining 1.8% last week. EUROSTOXX 50 futures decreased by 0.1% and FTSE futures were fixed.
The treasury’s long-term returns have been the highest since March, after Friday’s weak job report only fueled speculation about more US fiscal stimulus now that Democrats have control of the government.
President-elect Joe Biden is set to announce plans for “trillions” in new relief bills this week, much of which will be repaid through increased loans.
At the same time, the Federal Reserve sounds pleased to take on the burden of fiscal policy, with Vice President Richard Clarida saying there will soon be no change in the $ 120 billion debt the Fed buys each month.
As the Fed did not want to buy longer-term bonds, the Treasury’s 10-year yields jumped nearly 20 basis points last week to 1.12%, the biggest weekly increase since June.
Treasury futures lost 3 more ticks early Monday.
BofA’s Mark Cabana warned that the stimulus could put additional pressure on the dollar and lead to a reduction in the Fed later this year.
“The Fed’s early ratio poses risks to our Finance Department’s 10-year end-of-year target and supports our long-term expectations of neutral interest rates, which are hovering around 3%,” he said in a note to clients.
The report on poor wages will increase interest in US data on inflation, retail sales and consumer sentiment.
Profits will also be in focus, as JP Morgan, Citigroup and Wells Fargo are among the first companies to publish results for the fourth quarter on January 15.
The rise in yields, in turn, offered some support for the trampled dollar, which had jumped to 90,439 from a basket of currencies from last week’s lowest level of 89,206.
The euro returned to $ 1.2170 from a recent high of $ 1.2349, breaking support around $ 1.2190. The dollar also strengthened to 104.18 yen from the trough of 102.57 hit last week.
The sudden rise in bonds undermined interest-free gold, and the metal fell 1.1 percent to $ 1,828 an ounce from its last high of $ 1,959. [GOL/]
Oil prices fell after reaching their highest levels in nearly a year on Friday, gaining 8% in the week after Saudi Arabia promised to cut production. [O/R]
Brent crude futures fell 48 cents to $ 55.51, while US futures lost 28 cents to $ 51.96 a barrel.