(Aug 3): Asian stocks look set to slip early Tuesday after U.S. equities turned lower, Treasury yields tumbled and oil slid on concerns the economic recovery from the pandemic is losing momentum.
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Futures fell in Japan and Australia and were little changed in Hong Kong. The S&P 500 ended with a modest drop and the 10-year U.S. Treasury yield fell as low as 1.15% as the fast-spreading delta Covid-19 variant and signs of robust but softer U.S. manufacturing growth soured sentiment. U.S. equity contracts were steady in early Asia trading.
Oil plunged the most in two weeks as the virus dents the outlook for consumption, including in China where economic reports also suggest a slowdown from peak expansion. The dollar dipped.
The real yield on 10-year Treasuries — which strips out the expected impact of inflation over the next decade — fell to a fresh low of minus 1.22%. For some, the decline points to a tougher period ahead for the economic recovery from the pandemic. Traders are awaiting key U.S. jobs data this week for more clues about progress on economic reopening.
“I think people are looking at the sharp drop in long rates and flattening of the yield curve and they are getting worried about economic growth,” said Peter Boockvar, chief investment officer for Bleakley Advisory Group. “That growth concern comes from the inflation-driven slowdown we’re seeing in some sectors in addition to delta variant worries in emerging markets.”
Investors will be monitoring the China and Hong Kong opens later to see if equity gauges build on Monday’s rebound. Stocks there remain under a cloud as Beijing tightens its grip over a range of private industries and major companies.
Here are some key events to watch this week:
Earnings are due this week from Alibaba, BP, Toyota, Uber, Roku, Moderna, KKR
Reserve Bank of Australia policy decision Tuesday
Bank of England is expected to keep its benchmark interest rate and its bond-buying target unchanged Thursday
Reserve Bank of India monetary policy decision, briefing Friday
The U.S. jobs report is expected to show another robust month of hiring Friday
Stocks
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S&P 500 contracts rose 0.1% as of 7:01 a.m. in Tokyo. The S&P 500 index fell 0.2%
Nasdaq 100 futures added 0.1%. The Nasdaq 100 was little changed
Nikkei 225 futures fell 0.5%
Australia’s S&P/ASX 200 Index futures lost 0.3%
Hang Seng Index futures were little changed
Currencies
The Bloomberg Dollar Spot Index dipped 0.1% Monday
The euro was little changed at US$1.1873
The Japanese yen traded at 109.32 per dollar
The offshore yuan was at 6.4638 per dollar
Bonds
The yield on 10-year Treasuries declined about five basis points to 1.18%
Commodities
West Texas Intermediate crude rose 0.4% to US$71.54 a barrel after dropping 3.6%
Gold was at US$1,813.31 an ounce-BLOOMBERG