Asian stocks fluctuated Wednesday as investors weighed the strength of the economic recovery in anticipation of the Federal Reserve’s policy statement. Benchmark Treasury yields hovered near their highest levels in over a year.
Equity benchmarks were steady in Japan and down in Australia and South Korea. Shares in China and Hong Kong rallied off early lows. U.S. equity futures wavered after losses in energy and industrials dragged on the S&P 500, snapping three sessions of record-breaking gains. The Dow Jones Industrial Average also fell from a record high, while Apple Inc. and Microsoft Corp. lifted the tech-heavy Nasdaq 100.
The Treasury 10-year yield traded around 1.62% ahead of day two of the Fed’s meeting, and a 20-year bond auction drew strong demand. Market-implied inflation expectations are at 12-year highs, and oil was steady below $65 a barrel. The dollar was stronger versus most major peers.
The Fed’s new projections for rates and the economy, due Wednesday, are center stage as the global recovery gains traction. Rates markets are positioned for a hike sooner than the central bank’s current guidance suggests, with rising inflation expectations boosting bond yields and sparking a rotation from growth to value stocks. Seasoned 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 also long duration equities — may not be the only games in town anymore,” said David Wong, investment strategist at AllianceBernstein.
Elsewhere, Bitcoin traded above $56,000, down from a weekend peak above $61,000.
These are some key events this week:
- Fed Chair Jerome Powell will likely reaffirm his steady policy stance at the Fed policy meeting Wednesday.
- Bank of England rate decision Thursday. BOE is expected to leave monetary policy unchanged.
- Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing Friday.
Stocks
- S&P 500 futures slipped 0.1% as of 11:30 a.m. in Tokyo. The S&P 500 Index declined 0.2%.
- Topix index was flat.
- Australia’s S&P/ASX 200 Index fell 0.8%.
- South Korea’s Kospi Index dropped 0.9%.
- Hang Seng Index rose 0.4%.
- Shanghai Composite Index was up 0.1%.
- CSI 300 Index rallied 0.8%.
Currencies
- The yen fell 0.1% to 109.13 per dollar.
- The offshore yuan traded at 6.5067 per dollar.
- The Bloomberg Dollar Spot Index rose 0.1%.
- The euro was at $1.1895, down 0.1%
Bonds
- The yield on 10-year Treasuries was at 1.62%.
- Australia’s 10-year bond yield rose three basis points to 1.72%.
Commodities
- West Texas Intermediate crude was at $64.72 a barrel.
- Gold was little changed at $1,731.49 an ounce.
