Asia stocks drop, futures waver; dollar holds gain

Bloomberg

Most Asian stocks fall on Wednesday as the dollar held around a one-year high, bolstered by robust US economic data that highlighted the case for tighter monetary policy and pushed up Treasury yields.
MSCI Inc’s Asia-Pacific stock index snapped a four-day climb, with Japan lower amid slower export gains. US and European futures fluctuated. The S&P 500 extended a rally overnight on expanding retail sales and solid reports from the likes of Home Depot Inc that supported confidence in the US outlook.
But a call for more hawkish monetary policy from Federal Reserve Bank of St Louis President James Bullard underlined worries that high inflation could yet derail growth. Markets are waiting to see who President Joe Biden picks as Fed chair nominee from Governor Lael Brainard and incumbent Jerome Powell.
The yen traded around its weakest in more than four years and the euro was at the lowest since July 2020. Emerging Asian currencies slid.
Treasuries held losses, with the 10-year yield above 1.6%. Traders are waiting to see the strength of demand at a 20-year auction.
Corporate profits have generally weathered the price pressures building up in the recovery from the pandemic, helping global stocks to stay around all-time highs. The question remains whether the jump in costs will prove transitory or become a bigger challenge that forces a sharper monetary policy response,
roiling both shares and bonds.
“We expect more volatility ahead with rising rates,” while inflation and Covid concerns continue to stir anxiety,
but equity markets “should remain strong” heading into the year-end, Xi Qiao, a managing director at UBS Global Wealth Management, said on Bloomberg Television.
The heads of two global banks predicted an uncertain time ahead for the world economy as the inflation rises and
persists.
“Uncomfortably high” rates of inflation may be around for one to three years, UBS Group AG Chairman Axel Weber said at the Bloomberg New Economy Forum in Singapore on Wednesday. Inflation is getting a lot more structural, DBS Group Holdings Ltd. Chief Executive Officer Piyush Gupta said at the event.
Meanwhile, Treasury Secretary Janet Yellen indicated the US government would be at risk of default unless lawmakers lift the legal debt ceiling by December 15. Yields on Treasury bills maturing at the end of the year rise.
In Australia, the currency retreated after wages data Wednesday backed Reserve Bank Governor Philip Lowe’s dovish stance.
Elsewhere, oil declined as investors weighed the odds that the Biden administration will tap emergency reserves in a coordinated move with nations such as China.
S&P 500 futures were little changed as of 6:55 am in London and the S&P 500 rises 0.4%. While Nasdaq 100 futures were little changed, the Nasdaq 100 rises 0.8% and Japan’s Topix index falls 0.6%. While Australia’s S&P/ASX 200 Index falls 0.7%.
South Korea’s Kospi index also lost 1.2% and Hong Kong’s Hang Seng Index slid 0.4%. China’s Shanghai Composite Index added 0.4% and Euro Stoxx 50 futures fall 0.1%.
The Japanese yen was at 114.84 per dollar and the offshore yuan was at 6.3856 per dollar.
While the Bloomberg Dollar Spot Index was steady, the euro was at $1.1305, down 0.1%.