(Bloomberg) -- Stocks slid with U.S. and European equity futures Thursday after a surge in bond yields reignited concerns about valuations. Tumbling Chinese shares led the equity losses in Asia.
MSCI Inc.’s Asia-Pacific gauge had its worst drop this week. The technology sector struggled while real estate, finance and energy shares outperformed amid a shift to value segments. S&P 500 and Nasdaq 100 futures dipped but were off earlier lows after an overnight slump in both indexes.
Benchmark Treasury yields edged lower in Asian trading after approaching 1.5% on Wednesday. A market gauge of inflation expectations over the next five years hit its highest level since 2008. Traders also assessed data pointing to a still uneven economic recovery from the depths of the pandemic.
The rise in inflation expectations and long-term borrowing costs is stoking concern that a 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
Democratic leaders in the Senate are working to consolidate support for the $1.9 trillion stimulus bill, which is expected to spur growth. The U.S. economy expanded modestly in the first two months of the year and vaccinations are aiding business optimism, according to the Federal Reserve’s Beige Book.
Elsewhere, oil traded near $62 a barrel, with traders focusing on a critical OPEC+ meeting that may see supply curbs eased, while tracking events in the Middle East after Houthi rebels said they hit a Saudi Aramco site with a missile.
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 0.2% as of 7:16 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 1.3%.Hong Kong’s Hang Seng index lost 1.9%.Shanghai Composite was down 2.1%. The CSI 300 index lost 3.2%.Euro Stoxx 50 futures dropped 0.7%.
Currencies
The yen traded at 107.16 per dollar, down 0.1%.The offshore yuan was at 6.4742 per dollar.The Bloomberg Dollar Spot Index was little changed.The euro traded at $1.2057.
Bonds
The yield on 10-year Treasuries dipped about two basis points to 1.46%.Australia’s 10-year bond yield rose 10 basis points to 1.77%.
Commodities
West Texas Intermediate crude added 0.8% to $61.76 a barrel.Gold was 0.5% higher at about $1,720 an ounce.
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