Asian stocks were steady early Thursday after U.S. shares took in their stride the prospect of a reduction in Federal Reserve stimulus as early as November. The Treasury yield curve flattened.
Stocks rose in Australia and dipped in South Korea. Japan is shut for a holiday and Hong Kong will reopen from one. U.S. futures climbed after the S&P 500 pushed higher for the first time in five sessions and the Nasdaq 100 advanced.
Fed Chair Jerome Powell said the central bank could begin scaling back asset purchases in November and complete the process by mid-2022. Officials also revealed a growing inclination to raise interest rates next year. Shorter-maturity Treasury notes fell while longer-maturity debt edged higher. The dollar rose. Cash Treasuries won’t trade in Asia because of the Japan holiday.
Traders are continuing to monitor the debt crisis at China Evergrande Group. Some investor concerns appear to have eased though questions remain after the developer — which is straining under more than $300 billion of liabilities — issued a vaguely worded statement on a local bond interest payment. The focus has shifted to a payment due on a dollar note.
Powell said he didn’t expect the Fed to begin rate increases until after completing a taper process that would wrap up around the middle of 2022. The gradual shift away from ultra-loose policy, along with fears of contagion emanating from Evergrande, have shaped a volatile week for markets amid worries about a slowing recovery from the pandemic.
“The Fed has got to pleased that their communication on the longer way to tapering has avoided the dreaded fear of the tantrum,” Jeffrey Rosenberg, senior portfolio manager for systematic fixed income at Blackrock Inc., said on Bloomberg Television. “The flatter curve is kind of an initial response. Yes the curve is flatter, but you’ve got to squint to see that market reaction. This is a very good outcome for the Fed in terms of signaling their intent to give the market information well ahead of the tapering decision.”
Here are key events to watch this week:
- Bank of England rate decision, Thursday
- Fed Chair Jerome Powell, Fed Governor Michelle Bowman and Vice Chairman Richard Clarida discuss pandemic recovery, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.3% as of 9:20 a.m. in Tokyo. The S&P 500 rose 1%
- Nasdaq 100 futures rose 0.2%. The Nasdaq 100 rose 1%
- Australia’s S&P/ASX 200 Index added 0.9%
- South Korea’s Kospi index fell 0.6%
- The Japanese yen traded at 109.86 per dollar, down 0.1%
- The offshore yuan was at 6.4724 per dollar, down 0.1%
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was at $1.1686
- The yield on 10-year Treasuries declined two basis points to 1.30%
- Australia’s 10-year bond yield fell about two basis points to 1.24%
- West Texas Intermediate crude was at $72.11 a barrel, down 0.1%
- Gold was at $1,766.02 an ounce, down 0.1%