Stocks Slip as Commodity Costs Dim Growth Outlook: Markets Wrap

Most Asian stocks fell Tuesday as traders evaluated concerns that elevated commodity costs will fan inflation and choke economic expansion. Sovereign bond yields climbed.

Shares dipped in Japan but rose in Hong Kong and wavered in China. S&P 500 and Nasdaq 100 futures made modest gains, signaling steadier sentiment compared with the S&P 500’s 3% slide Monday, its worst drop since 2020.

Oil retreated but remained in sight of a near 14-year peak on fears of disarray in raw-material flows stemming from the war in Ukraine and sanctions on Russia. European gas, nickel and wheat hit unprecedented levels Monday.

Commodity costs are contributing to a climb in bond-market derived inflation expectations to records in the U.S. and Europe. Treasuries and sovereign debt in Australian and New Zealand slipped. A dollar gauge pared gains and gold fell.

In the U.S., lawmakers are moving toward barring imports of Russian oil. Russia for its part threatened to cut natural gas supplies to Europe via the Nord Stream 1 pipeline. That underlines how the conflict and economic warfare against resource-rich Russia are dimming the outlook.

Tightening monetary policy to contain inflation presents further challenges. The gap between two-year and 10-year Treasury yields is the least since March 2020, a sign of dimming growth prospects.

“It’s all about slowing growth and rising inflation,” Alifia Doriwala, Rock Creek co-chief investment officer, said on Bloomberg Television. “With the sanctions on Russia intensifying, it’s hitting all sectors. Then you are going to have some central bank action amidst much uncertain economic growth.”

Talks Monday between Ukrainian and Russian officials made limited progress on negotiating a cease-fire. Russian President Vladimir Putin said Kyiv must agree to his demands if fighting is to end. Talks are expected to continue.

JPMorgan Chase & Co. said it will remove Russian bonds from all of its widely-tracked indexes, further isolating the nation’s assets from global investors.

Here are some key events this week:Apple new product event, Tuesday.EIA crude oil inventory report, Wednesday. China aggregate financing, PPI, CPI, money supply, new yuan loans, Wednesday. Reserve Bank of Australia Governor Philip Lowe speaks, Wednesday and Friday

European Central Bank President Christine Lagarde briefing after policy meeting, Thursday. U.S. CPI, initial jobless claims, Thursday. Some of the main moves in markets:

Stocks. S&P 500 futures rose 0.4% as of 10:49 a.m. in Tokyo. The S&P 500 fell 3%. Nasdaq 100 futures rose 0.3%. The Nasdaq 100 fell 3.8%. Japan’s Topix index slipped 0.5%. Australia’s S&P/ASX 200 index lost 0.2%

South Korea’s Kospi index shed 0.4%. China’s Shanghai Composite index was steady. Hong Kong’s Hang Seng index rose 1%

Currencies. The Japanese yen was at 115.47 per dollar. The offshore yuan was at 6.3164 per dollar. The Bloomberg Dollar Spot Index fell 0.1%. The euro was at $1.0879

Bonds. The yield on 10-year Treasuries rose three basis points to 1.80%. Australia’s 10-year bond yield rose nine basis points to 2.22%. Commodities. West Texas Intermediate crude fell 0.6% to $118.71 a barrel.Gold was at $1,985.28 an ounce, down 0.6%. 

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