(Bloomberg) — Asian stocks and U.S. equity futures slid Tuesday after a technology-led Wall Street tumble as surging commodity prices stoked concern about inflation. A dollar gauge was steady.
MSCI Inc.’s Asia-Pacific share index fell the most since March, with technology underperforming amid a sea of red from Japan to Hong Kong. Nasdaq 100 contracts retreated about 1% after the index tumbled on concern that higher inflation could push up interest rates, weighing on equity valuations. S&P 500 futures dropped after the gauge fell from an all-time high.
Oil dipped as traders monitored the worsening fallout from the closure of the largest U.S. oil-products pipeline. The spotlight remains on the broad commodity rally, which threatens to stoke price pressures. Data showed China’s factory-gate prices surged more than expected in April.
A measure of inflation expectations earlier reached the highest level since 2006. The 10-year Treasury yield eased back slightly after rising to 1.60%.
The run-up in raw materials is intensifying debate ahead of a U.S. CPI report Wednesday that is forecast to show a strong gain in April. The year-on-year reading will be amplified by the pandemic shock a year earlier, but it plays into a broader market concern that the Federal Reserve may be forced to raise interest rates sooner than current guidance suggest to contain inflation.
“We’re going to see volatility definitely over the next couple of months” given uncertainty over the path of growth, Kristen Bitterly, head of capital markets in the Americas for Citi Private Bank, said on Bloomberg TV. “Cash and duration are punitive so you need to make sure that where you have that yield is non-rates sensitive parts of the market.”
The Australian dollar climbed ahead of the federal budget. The government is expected to unveil a narrowing fiscal gap and more spending.
On the virus front, the World Health Organization will classify a fast-spreading strain of Covid-19 first identified in India — the scene of one of the world’s most fearsome outbreaks — as a variant of concern.
See here the MLIV Question of the Day: How Far Can Reflation Trades Go?
Here are some key events to watch this week:
A range of Fed speakers are due this week, including Governor Lael Brainard on Tuesday, among othersOPEC monthly Oil Market Report is published with global demand forecasts and production estimates TuesdayU.S. CPI report Wednesday is forecast to show prices continued to increase in AprilBank of England Governor Andrew Bailey speaks Wednesday
These are some of the main moves in markets:
Stocks
S&P 500 futures dipped 0.7% as of 12:01 p.m. in Tokyo. The S&P 500 Index shed 1%Nasdaq 100 contracts lost 1%. The Nasdaq 100 fell 2.6%Japan’s Topix index dropped 2%Australia’s S&P/ASX 200 Index fell 1.2%South Korea’s Kospi index lost 1.3%Hong Kong’s Hang Seng Index dropped 1.9%China’s Shanghai Composite Index fell 0.4%Euro Stoxx 50 futures fell 1.4%
Currencies
The yen was at 108.87 per dollarThe offshore yuan was at 6.4201 per dollarThe Bloomberg Dollar Spot Index was little changedThe euro traded at $1.2144
Bonds
The yield on 10-year Treasuries dipped about one basis point to 1.59%Australia’s 10-year bond yield was at 1.72%
Commodities
West Texas Intermediate crude was at $64.48 a barrel, declining 0.7%Gold was little changed at $1,837.28 an ounce
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