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Bloomberg
Stocks dropped while US futures drifted ahead of a key Federal Reserve meeting at which officials will deliver their outlook for the economy amid a budding recovery that risks stoking inflation. Treasury yields edged higher.
The Stoxx Europe 600 Index slipped as declines in retail shares outweighed gains for automakers. BMW AG shares rose 4% after the company forecast better profitability than analysts had estimated. Futures on the S&P 500 fluctuated.
In Asia, South Korean stocks retreated as Samsung Electronics Co. warned it’s grappling with the fallout from a “serious imbalance†in semiconductors globally.
The Fed’s policy and outlook updates are center stage as the global recovery gains traction. The Treasury 10-year yield held around 1.63% heading into day two of the Fed’s meeting, after a 20-year bond auction drew strong demand. Market-implied inflation expectations are at 12-year highs. The dollar was stronger versus most major peers.
Rates markets are positioned for the Fed to raise borrowing costs sooner than current guidance suggests. Higher inflation expectations have boosted bond yields and sparked a rotation from growth to value stocks. Bond investor Bill Gross predicted in a Bloomberg TV interview that inflation will rise to 3% to 4% in the coming months.
“The concern is the assets that have worked best over the last decade — rates, credit of all kinds and long-duration equities — may not be the only games in town any more,†said David Wong, investment strategist at AllianceBernstein.
Elsewhere, WTI crude oil reversed a gain after the IEA said markets aren’t on the verge of a new price supercycle. Bitcoin held at about $56,000, below the weekend record above $61,000.
S&P 500 futures added 0.1% as of 6:20 am in London. The S&P 500 Index declined 0.2% and Japan’s Topix index rose 0.1%. While Australia’s S&P/ASX 200 Index falls 0.5%, South Korea’s Kospi Index dropped 0.5%.
Hong Kong’s Hang Seng Index was little changed and China’s Shanghai Composite Index slipped 0.1%.
While the yen falls 0.1% to 109.12 per dollar, the offshore yuan traded at 6.5011 per dollar.
The Bloomberg Dollar Spot Index rose 0.1% and the euro was steady at $1.1905.
While the yield on 10-year Treasuries was at 1.62%, Australia’s 10-year bond yield rise three basis points to 1.72%.
West Texas Intermediate crude was at $65.30 a barrel and gold was up 0.3% at $1,736.67 an ounce.