Stocks, Treasury Yields Rise as Crude Oil Climbs: Markets Wrap

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(Bloomberg) — Treasury yields rose and stocks in Asia stabilized Tuesday as investors weighed higher energy costs and an inflation outlook that’s prompting a slew of central banks to keep hiking interest rates.

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Shares climbed in Japan, Australia and South Korea. US equity futures pushed higher ahead of the resumption of Wall Street trading after a holiday. Treasuries dipped across the curve, taking the 10-year yield to 3.21%.

Crude oil has climbed to about $89 a barrel after OPEC+ agreed to cut 100,000 barrels a day in October. Natural gas prices surged in Europe on Monday, hurting the region’s shares, after Russia kept the Nord Stream pipeline offline.

A dollar gauge edged back while remaining in sight of a record level. The pound climbed as markets digested Liz Truss’ victory in the race to succeed Boris Johnson as UK prime minister. The euro found some relief after sliding to a two-decade low Monday, roiled by Europe’s energy woes.

The offshore yuan advanced after China on Monday announced a cut in the amount of foreign-exchange deposits banks must set aside as reserves, a move to aid the currency after it slid to a two-year low.

The next leg in a wave of monetary tightening is due in Australia, where economists expect the central bank to lift the policy rate by a further 50 basis points. Tightening financial conditions globally are weighing on stocks and bonds.

The dollar can find more support against the backdrop if “further negative headlines emerge on Europe’s energy crisis and/or China’s Covid situation,” Carol Kong, strategist at Commonwealth Bank of Australia, wrote in a note.

Aside from unveiling a foreign-exchange reserve ratio cut, officials in China also said they will speed up the roll out of stimulus in the third quarter. Beijing is stepping up support for an economy saddled with Covid lockdowns, a property-sector slump and power shortages.

Incoming UK Prime Minister Truss has drafted plans to fix annual electricity and gas bills for a typical UK household at or below the current level of £1,971 ($2,300). The policy could cost as much as £130 billion over the next 18 months.

Elsewhere, Bitcoin hovered below the $20,000 level and gold made modest gains.

What to watch this week:

  • Australia rate decision, Tuesday

  • Apple event due to feature new iPhones, watches, Wednesday

  • Bank of England Governor Andrew Bailey at Treasury Committee, Wednesday

  • Fed’s Beige Book of regional economic activity, Wednesday

  • Cleveland Fed President Loretta Mester due to speak, Wednesday

  • European Central Bank rate decision, Thursday

  • Fed Chair Jerome Powell speaks at a Cato Institute conference in Washington, Thursday

  • Reserve Bank of Australia Governor Philip Lowe speaks at event, Thursday

  • China PPI, aggregate financing, money supply, new yuan loans, Friday

  • EU energy ministers extraordinary meeting on emergency intervention in electricity markets, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures rose 0.6% versus Friday as of 9:29 a.m. in Tokyo. The S&P 500 fell 1.1% on Friday

  • Nasdaq 100 futures rose 0.7% versus Friday The Nasdaq 100 fell 1.4% on Friday

  • Japan’s Topix index added 0.3%

  • Australia’s S&P/ASX 200 index increased 0.4%

  • South Korea’s Kospi index rose 0.7%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.3%

  • The euro was at $0.9959, up 0.3%

  • The Japanese yen was at 140.32 per dollar, up 0.2%

  • The offshore yuan was at 6.9369 per dollar, up 0.1%

Bonds

Commodities

  • West Texas Intermediate crude was at $88.79 a barrel, up 2.2% versus Friday

  • Gold was at $1,717.54 an ounce, up 0.4%

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