SYDNEY (Reuters) – Asian stocks took a breather on Monday, while government bond yields hit a 10-month high as “trillions” of new US fiscal stimulus plans were to be unveiled this week, sparking global reflationary trade.
Investors kept on guard in US politics as pressure grew to impeach President Donald Trump, although signs that an actual lawsuit could be away for some time.
MSCI’s widest index of Asia-Pacific stocks outside Japan fell 0.2%, after a 5% rise to record highs last week. Japan’s Nikkei was on vacation after closing at a 30-year high on Friday.
South Korea went flat after an early jump and Chinese blue chips were up 0.7%.
“Asia has weathered the second global crisis of this millennium with its credentials,” said ANZ chief economist Richard Yetsenga.
“Growth in Asia is stronger, with for the most part better demographics and debt, than in developed economies.”
He noted a turnaround in fortunes between the semiconductor and energy sectors, underscoring Asia’s success as the region produced about 45% of the world’s semiconductors.
“For the first time, the market cap of the global semiconductor industry has surpassed energy,” he said. “At the time of the last crisis, 12 years ago, the energy sector was more than five times the size.”
Futures for the S&P 500 are down 0.6% from all peaks, after gaining 1.8% last week. EUROSTOXX 50 futures eased 0.1% and FTSE futures remained stable.
Longer-term government bond yields were at their highest since March, after Friday’s weak jobs reporting only fueled speculation of more US fiscal stimulus now that Democrats have control of the government.
President-elect Joe Biden will this week announce plans for “trillions” of new emergency bills, much of which will be paid by increasing loans.
At the same time, the Federal Reserve has voiced satisfaction with taxing fiscal policy, with Vice President Richard Clarida saying the $ 120 billion in debt the Fed buys every month is not going to change anytime soon.
As the Fed was reluctant to buy longer-dated bonds, yields on 10-year Treasury bonds rose nearly 20 basis points last week to 1.12%, the largest weekly increase since June.
Treasury futures lost another 3 ticks early Monday.
BofA’s Mark Cabana warned that stimulus measures could put further pressure on the dollar, which could force the Fed to wind down later this year.
“An early run-off from the Fed creates upside risks to our 1.5% ten-year Treasury target by the end of the year and supports our long-term outlook for a neutral interest rate approaching 3%,” he said in a note to clients.
The poor salary report will increase interest in US data on inflation, retail sales and consumer confidence.
Earnings will also be in the center as JP Morgan, Citigroup and Wells Fargo are among the first companies to publish fourth quarter results on January 15.
The rise in interest rates, in turn, provided some support for the beaten dollar, which had risen to 90,439 against a basket of currencies from last week’s low of 89,206.
The euro retreated to USD 1.2170 from a recent high of USD 1.2349 and broke the support around USD 1.2190. The dollar also stabilized to 104.18 yen from a low of 102.57 reached last week.
The sudden rise in bond yields undermined gold, which pays no interest, and the metal fell 1.1% to $ 1,828 an ounce from its recent high of $ 1,959. [GOL/]
Oil prices took gains after hitting their all-time high in nearly a year on Friday, rising 8% in the week after Saudi Arabia pledged to cut production. [O/R]
Brent futures fell 48 cents to $ 55.51, while US crude oil futures lost 28 cents to $ 51.96 a barrel.