Stocks Decline as Yields Flag Inflation Worries: Markets Wrap

(Bloomberg) — Asia stocks declined Wednesday as rising bond yields stoked fears about inflation and as China Evergrande Group’s debt crisis intensified.

MSCI Inc.’s gauge of Asian stocks dropped more than 1% — and is headed for its first quarterly slide in six. Japan fell more than 2%. Hong Kong and China also dropped on the deepening debt crisis at Evergrande. U.S. futures advanced after the S&P 500 closed 2% lower — the most since May — with concerns over the debt-ceiling impasse in Washington adding to investor angst. The Nasdaq 100 tumbled the most since March as technology shares fared worse than economically sensitive stocks amid rising Treasury yields.

Ten-year Treasury yields stabilized. 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. The dollar held gains. 1

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.

A global equity rally has stalled as investors reel 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.

“Part of the reason the U.S. markets have been so strong and for so long is because of the complacency that inflation is gone and that central banks can keep interest rates low for a very long time,” Belita Ong, Dalton Investments chairman, said on Bloomberg Television. “So many things are in flux: the pandemic is not over, the supply chain bottlenecks we are seeing are affecting all sorts of prices and we’ll need to see how it plays out because the results are not clear in terms of inflation.”

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.

Contact editor Michael Bellart (michaelbellart@caixin.com)

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