(Bloomberg) — Asia stocks fell at the open Wednesday after U.S. stocks saw their worst day since May and bond yields spiked on concerns about inflation. Treasuries added to a decline.
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Equities fell in Japan, Australia and South Korea as mounting concerns over the debt-ceiling impasse in Washington added to investor angst. U.S. futures rose after the S&P 500 closed 2% lower — the most since May. Technology shares fared worse than economically sensitive stocks as Treasury yields climbed. The Nasdaq 100 tumbled the most since March.
The 10-year Treasury yield edged higher. Earlier, the yield on the 30-year note jumped almost 10 basis points. WTI crude retreated toward $74 a barrel. Brent crude pulled back from a three-year high above $80 a barrel. Gold was steady after declining. The dollar held gains.
During a Senate hearing, Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen both warned that a U.S. default due to a failure to raise the debt ceiling would have catastrophic consequences. Republicans blocked a Democratic move in the Senate to raise the debt limit.
Heated remarks from Senator Elizabeth Warren also weighed on markets. After slamming Powell on his track record over financial regulation, Warren said he’s a “dangerous man to head up the Fed” and that’s why she’ll oppose his renomination.
The debate in Washington is the latest headwind for investors reeling from surging energy costs at the same time central banks are laying down plans to withdraw some of the pandemic stimulus. U.S. consumer confidence dropped in September for a third straight month, suggesting concerns over the delta variant and higher prices continue to dampen sentiment.
“What we got here is stock market that finally looks vulnerable as Treasury yields surge, oil prices look like they could easily hit $90 a barrel, and as supply chain issues show no signs of easing,” said Edward Moya, senior market analyst at OANDA. “There is a lot of drama happening on Wall Street and most of it has to do with a reset of inflation expectations.”
Read: Volatility Markets Light Up With S&P 500 Hitting Two-Month Low
Meanwhile, China Evergrande Group is facing another bond interest payment after giving no sign that it had paid a separate one last week, as its deepening debt crisis looms over global markets and highlights funding risks for other developers. In the U.S., Federal Reserve officials have questioned several big banks about their exposure to Evergrande.
Elsewhere, the pound traded around the lowest since January as expectations of higher rates were offset by surging energy prices and panic-buying that are keeping investors cautious. Bitcoin was trading below $42,000.
Here are some events to watch this week:
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Japan’s ruling party votes to elect leader, Wednesday
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Central bank chiefs Andrew Bailey (BOE), Haruhiko Kuroda (BOJ), Christine Lagarde (ECB) and Jerome Powell (Fed) participate in an ECB Forum panel, Wednesday
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House Financial Services Committee hearing on the Fed, Treasury’s pandemic response, Thursday
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China Caixin manufacturing PMI, non-manufacturing PMI, Thursday
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Univ. of Michigan sentiment, ISM manufacturing, U.S. construction spending, spending/personal income, Friday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 0.4% as of 9:08 a.m. in Tokyo. The S&P 500 fell 2%
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Nasdaq 100 futures rose 0.4%. The Nasdaq 100 fell 2.9%
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Topix index dropped 2%
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Australia’s S&P/ASX 200 Index fell 1.1%
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Kospi index fell 1.3%
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Hang Seng Index futures fell 0.8%
Currencies
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The Japanese yen was at 111.54 per dollar
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The offshore yuan was at 6.4707 per dollar
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The Bloomberg Dollar Spot Index was little changed
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The euro traded at $1.1685
Bonds
Commodities
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West Texas Intermediate crude fell 0.9% to $74.58 a barrel
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Gold was at $1,734.67 an ounce
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