Dollar Extends Decline; Treasury Yields Retreat: Markets Wrap - Bloomberg

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The dollar extended overnight losses and Treasury yields continued their retreat from a 10-month high as traders mulled investor demand for bonds and the prospect of fiscal spending under Joe Biden. Asian stocks were mostly higher.

Ten-year Treasury yields fell to just above 1.10% after a government auction on Tuesday was met with solid interest. The spread between the rate on the two- and 10-year notes had risen every single day this year as investors bet on additional U.S. fiscal stimulus, more bond issuance and higher yields on longer-maturity Treasuries. Emerging-market currencies saw broad support as the dollar continued to edge down, while the offshore yuan slipped after a weaker-than-estimated daily currency fixing. Oil was on course for its longest winning streak in almost two years.

In Japan, the Nikkei 225 outperformed, reaching a record high in dollar terms. Equities also ticked up in Korea, Hong Kong was flat, while Australian shares reversed earlier losses. S&P 500 contracts edged higher after the index fluctuated between gains and losses before closing flat on Tuesday.

While progress on a vaccine is providing hope to investors banking on an economic recovery, there are lingering concerns over the speculative excess and froth that’s driven stock markets to all-time highs in the middle of a pandemic. Two Federal Reserve officials pushed back on speculation that the central bank will begin to taper its asset-purchase program any time soon.

“What I think investors are most focused on is the digesting of what is shifting fiscal policy,” said David Bianco, chief investment officer of the Americas at DWS Group. “We’re beginning to lose the anchor on some long-term key benchmark interest rates.”

In Washington, the House is moving forward on an expected vote to impeach the President Donald Trump for the second time in little more than a year. Meantime, President elect Biden will seek a deal with Republicans on another round of stimulus, rather than trying to ram a package through without their support, according to people familiar with the matter.

Elsewhere, Bitcoin dropped around 5% to $33,000. Gold extended gains. Corn futures surged Tuesday on a tighter-than-expected supply outlook.

Here are some key events coming up:

• JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co., as well as firms ranging from Taiwan Semiconductor Manufacturing Co. to Infosys Ltd., are among those due to report earnings.
• EIA crude oil inventory report is due Wednesday.
• European Central Bank’s Christine Lagarde speaks at an online conference Wednesday.
• U.S. consumer-price inflation figures are due Wednesday.
• U.S. President-elect Joe Biden plans to lay out proposals for fiscal support on Thursday.
• Federal Reserve Chairman Jerome Powell takes part in a webinar on Thursday.
• U.S. initial jobless claims data are due Thursday.
• U.S. retail sales, industrial production, business inventories and consumer sentiment figures are due Friday.

These are some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 12:02 p.m. in Tokyo. The gauge was little changed on Tuesday.
• Japan’s Topix index climbed 0.1%. The Nikkei 225 advanced 0.6%.
• Hong Kong’s Hang Seng was flat.
• Shanghai Composite fell 0.3%.
• Australia’s S&P/ASX 200 Index was little changed.
• South Korea’s Kospi rose 0.1%.

Currencies

• The Bloomberg Dollar Spot Index dropped 0.1%.
• The yen was at 103.60 per dollar, up 0.2%.
• The euro bought $1.2213.
• The offshore yuan traded at 6.4480 per dollar, down 0.1%.

Bonds

• The yield on 10-year Treasuries fell to to 1.11%.

Commodities

• West Texas Intermediate crude climbed 1% to $53.72 a barrel.
• Gold was at $1,859.25 an ounce, up 0.2%.

— With assistance by Kamaron Leach, Dave Liedtka, Nancy Moran, Claire Ballentine, and Cormac Mullen

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Dollar Extends Decline; Treasury Yields Retreat: Markets Wrap - Bloomberg
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