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Treasuries climb on Fed speculation; stocks steady: markets wrap

US Treasury yields slipped Tuesday amid speculation about the leadership of the Federal Reserve, while stocks were mixed as a global equity rally paused.

Treasuries rose following a report that Fed Governor Lael Brainard was interviewed for the top job at the US central bank. Some commentators argue the Fed would be more dovish under Brainard. Meanwhile, the yield on 30-year Treasury inflation-protected securities slid to a record low, a sign of ongoing concerns about inflation risks in the global economy.

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MSCI Inc.’s Asia-Pacific gauge was little changed, while US futures fluctuated and European ones retreated. The S&P 500 eked out a gain overnight to post its longest winning run since 2017 but a drop in Tesla Inc. weighed on the Nasdaq 100. The Federal Reserve in a report warned asset prices could slide if sentiment sours.

The dollar fell and the yen strengthened. In cryptocurrencies, Bitcoin jumped past $68 000 for the first time to set a new all-time high. That’s part of a broader rise in digital tokens that has taken their overall market value past $3 trillion.

Read: Bitcoin jumps past R1.02m level for first time to record high

Global stocks remain around all-time peaks. Coronavirus treatments, easing travel curbs and the $550 billion US infrastructure bill have aided sentiment. Key central banks have also indicated they plan to scale back loose monetary policy very gradually. But a major risk is that inflationary pressures caused by creaking supply chains and energy prices last longer than officials expect.

“Central banks were less hawkish than the markets were expecting them to be last week so we are seeing real yields going further down into negative territory,” Lale Akoner, BNY Mellon Investment Management senior market strategist, said on Bloomberg Television. The reflation trade is coming back again and the market is pricing in “a mid-cycle environment,” she said.

Powell and Brainard are the only people who have publicly surfaced as being in the running for Fed chair. Jerome Powell’s current term in that post expires in February and Biden said on November 2 that he’d make a decision “fairly quickly.” A large majority of economists polled by Bloomberg News expect Biden will renominate Powell.

The troubles in China’s property sector remain in focus. Two holders of dollar notes sold by a unit of China Evergrande Group are yet to receive payment for coupons that were officially due Saturday. China’s higher-quality dollar bonds are suffering their worst selloff in about seven months as the property woes spill into the broader credit market.

Elsewhere, crude was steady as traders evaluate the possibility of US steps to ease oil and gas prices. Gold was around the highest in two months.

What to watch this week:

  • China’s Communist Party’s decision-making Central Committee meets through Thursday.
  • Federal Reserve Bank of San Francisco President Mary Daly speaks Tuesday.
  • China aggregate financing, money supply, new yuan loans Tuesday.
  • China PPI Wednesday.
  • US wholesale inventories, CPI, initial jobless claims Wednesday.
  • US bond marked is closed in observance of Veterans Day Thursday.
  • China holds its annual Singles’ Day, the world’s biggest shopping festival, when e-commerce giants like Alibaba and JD.com Inc. lure buyers with bargains Thursday.

Stocks

  • S&P 500 futures fell 0.1% as of 6:05 a.m. in London. The S&P 500 rose 0.1%.
  • Nasdaq 100 futures were flat. The Nasdaq 100 fell 0.1%.
  • Japan’s Topix index fell 0.8%.
  • Australia’s S&P/ASX 200 Index shed 0.2%.
  • South Korea’s Kospi index lost 0.1%.
  • Hong Kong’s Hang Seng Index increased 0.1%.
  • China’s Shanghai Composite Index rose 0.3%.
  • Euro Stoxx 50 futures fell 0.3%.

Currencies

  • The Japanese yen was at 112.77 per dollar, up 0.4%.
  • The offshore yuan traded at 6.3910 per dollar.
  • The Bloomberg Dollar Spot Index was 0.2% lower.
  • The euro was at $1.1604.

Bonds

  • The yield on 10-year Treasuries was at 1.48%, down one basis points.
  • Australia’s 10-year bond yield rose three basis points to 1.78%.

Commodities

  • West Texas Intermediate crude was at $82.04 a barrel.
  • Gold was at $1 825.29 an ounce.

© 2021 Bloomberg

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