SYDNEY (Reuters) – Asian stocks took a breather on Monday, while Treasury yields were at a ten-month high as “trillions” would be presented this week in new US fiscal stimulus plans, sparking a trade global reflection.
Investors were watching U.S. policy as pressure grew to accuse President Donald Trump, though signs of a real trial could be far away.
MSCI’s broader Asia-Pacific stock index outside of Japan fell 0.2%, after rising 5% last week to peak. The Japanese Nikkei was on vacation after closing for a maximum of 30 years on Friday.
South Korea fell after an early jump and Chinese blue chips confirmed 0.7%.
“Asia has gone through the second global crisis of this millennium with its credentials,” said Richard Yetsenga, chief economist at ANZ.
“Asian growth is stronger, with a larger demographic and better debt levels than advanced economies.”
He noted a shift in fortunes between semiconductors and energy that highlighted Asia’s success, as the region produced about 45% of the world’s semiconductors.
“For the first time, the market capitalization of the global semiconductor sector has surpassed energy,” he said. “At the time of the last crisis, twelve years ago, the energy sector was more than five times bigger.”
S&P 500 futures fell 0.6% from all-time highs, after gaining 1.8% last week. EUROSTOXX 50 futures relaxed 0.1% and FTSE futures were flat.
Long-term Treasury yields have been at their highest since March, after Friday’s weak job report only fueled speculation about more U.S. fiscal stimulus now that Democrats have control of the government.
This week, President-elect Joe Biden will announce plans for “trillions” in new relief bills, much of which will be paid for increased debt.
At the same time, the Federal Reserve is pleased to put the burden on fiscal policy and Vice President Richard Clarida said there will soon be no change in the $ 120 billion debt the Fed buys each month.
As the Fed is reluctant to buy bonds with a longer date, ten-year Treasury yields jumped nearly 20 basis points last week to 1.12%, the biggest weekly rise since June.
Treasury futures lost another 3 ticks early Monday.
Mark Cabana at BofA warned that the stimulus could put even more pressure on the dollar and cause the Fed’s downturn to begin later this year.
“An initial Fed reduction creates upside risks to our 10-year Treasury target at the end of 1.5% and supports our long-term expectations of neutral rates moving toward 3% “, he said in a note to customers.
Poor payroll reporting will increase interest in U.S. data on inflation, retail sales and consumer sentiment.
Profits will also focus, as JP Morgan, Citigroup and Wells Fargo are among the first companies to post fourth-quarter results on January 15th.
The rise in yields, in turn, offered some support for the hit dollar, which had risen to 90,439 against a basket of currencies from last week’s low of 89,206.
The euro retreated to $ 1.2170 from the recent high of $ 1.2349, breaking support at around $ 1.2190. The dollar was also confirmed at 104.18 yen from a range of 102.57 times last week.
The sudden rise in bonds results in an undercutting of gold, which pays no interest, and the metal fell 1.1%, to $ 1,828 an ounce, from its recent peak of $ 1,959. [GOL/]
Oil prices were profitable after hitting a one-year high on Friday, gaining 8% a week after Saudi Arabia pledged to cut production. [O/R]
Brent crude futures fell 48 cents to $ 55.51, while U.S. crude futures lost 28 cents to $ 51.96 a barrel.