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Shares, Futures Decline as Treasuries Dangle Losses: Markets Wrap

(Bloomberg) — China led Asian stocks lower and U.S. futures declined Thursday after a surge in sovereign bond yields reignited concerns about valuations. Treasuries held those losses.

MSCI Inc.’s Asia-Pacific gauge suffered its worst loss this week with China and Hong Kong bearing the brunt of the selloff. The technology sector struggled while real estate, finance and energy shares outperformed as part of a global shift to value segments. S&P 500 and Nasdaq 100 futures dipped after a slump in the indexes took the tech-heavy gauge to a two-month low. European contracts slid.

Australian bonds tumbled after benchmark Treasury yields approached 1.5% in U.S. trading. A market gauge of inflation expectations over the next five years hit its highest level since 2008.

The rise in inflation expectations and long-term borrowing costs is stoking concern that the prolonged rally in equity markets may be in jeopardy. Investors are trying to assess central banks’ appetite to buy more longer-dated bonds to keep financial conditions loose. The focus turns to Federal Reserve Chairman Jerome Powell’s upcoming comments, after Chicago Fed President Charles Evans said the recent climb in yields reflected economic optimism.

“Inflation is a concern; there is a lot of money sloshing around the system and it makes sense to have some sort of a correction right now,” said Shana Sissel, Spotlight Asset Group chief investment officer. “And bond yields going up is the market’s implicit way of tightening since the Fed has made it clear they don’t have the intention of doing so.”

Read: U.S. Inflation Expectations Hit Decade High as Yields Resurge

Traders are also assessing data pointing to an uneven economic recovery from the depths of the pandemic. The U.S. economy expanded modestly in the first two months of the year and vaccinations are supporting business optimism, according to the Federal Reserve’s Beige Book. Democratic leaders in the Senate are working to consolidate support for the $1.9 trillion stimulus bill, which is expected to spur the expansion.

Elsewhere, oil was above $61 a barrel as investors waited for the result of a critical OPEC+ policy meeting later Thursday. Bitcoin traded around $50,000.

Some key events to watch this week:

OPEC+ meeting on output Thursday.U.S. factory orders, initial jobless claims and durable goods orders are due Thursday.Federal Reserve Chairman Jerome Powell speaks Thursday.The February U.S. employment report on Friday will provide an update on the speed and direction of the nation’s labor market recovery.

These are some of the moves in markets:

Stocks

S&P 500 futures fell 0.5% as of 6 a.m. in London. The S&P 500 fell 1.3%. The Nasdaq 100 lost 2.9%.Japan’s Topix index fell 1%.Australia’s S&P/ASX 200 index fell 0.8%.South Korea’s Kospi index slid 1.1%.Hong Kong’s Hang Seng index lost 2.2%.Shanghai Composite was down 1.9%. The CSI 300 Index lost 2.8%.Euro Stoxx 50 futures dropped 0.8%.

Currencies

The yen traded at 107.08 per dollar.The offshore yuan was at 6.4730 per dollar.The Bloomberg Dollar Spot Index was little changed.The euro traded at $1.2060.

Bonds

The yield on 10-year Treasuries was steady at 1.47% after rising nine basis points.Australia’s 10-year bond yield rose 10 basis points to 1.77%.

Commodities

West Texas Intermediate crude added 0.6% to $61.66 a barrel.Gold was 0.4% higher at about $1,717.24 an ounce.

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