(Bloomberg) — Asian stocks traded mixed Tuesday, with Chinese equities sliding after the central bank net withdrew liquidity from the banking system. Treasuries maintained losses. The yen fell to its weakest since 2017 against the dollar.
Japan and Australia advanced as they reopened after the holiday. Chinese indexes fell as the People Bank of China net drained short-term cash, prompting concerns over support for the financial system. U.S. futures were little changed after the S&P 500 ended at a record even as trading volumes remained light.
Benchmark Treasury yields steadied after climbing across the curve. The yield on the 10-year note topped 1.60% in its worst start to a year since 2009 as investors braced for Federal Reserve interest-rate hikes in 2022. The yen slid against all its Group-of-10 peers, and declined to 115.63 against the dollar.
Markets are anticipating an uptick in volatility. Investors are navigating headwinds from the omicron variant, supply-chain disruptions and more central banks winding back pandemic stimulus that propelled a third year of double-digit returns for equities.
U.S. December payroll data and minutes from the Fed’s meeting last month later this week may build a case for tightening to begin sooner.
“We expect 2022 to be far more challenging from an investment perspective,” Heather Wald, vice president at Bel Air Investment Advisors, said in an emailed note. “Rarely has a market delivered three consecutive years of double-digit returns, as we have seen from 2019-2021. With the Federal Reserve set to accelerate tightening and a fairly valued stock market, we anticipate more muted returns for the S&P next year but still expect equities to remain attractive versus other liquid asset classes.”
Elsewhere, crude oil in New York held gains ahead of an OPEC+ meeting on Tuesday to discuss production. Bitcoin hovered around $46,000.
What to watch this week:
- FOMC meeting minutes scheduled for release Wednesday
- Fed’s Bullard discusses the U.S. economy and monetary policy in an event on Thursday
- Fed’s Daly discusses monetary policy on a panel Friday
- ECB’s Schnabel speaks on a panel Saturday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 11:42 a.m. in Tokyo. The S&P 500 rose 0.6%
- Nasdaq 100 futures were little changed. The Nasdaq 100 rose 1.1%
- Topix index rose 1.3%
- Australia’s S&P/ASX 200 Index advanced 1.7%
- Kospi index fell 0.4%
- Hang Seng Index fell 0.3%
- Shanghai Composite Index fell 0.8%
- Euro Stoxx 50 futures were little changed
Currencies
- The Japanese yen was at 115.58 per dollar
- The offshore yuan was at 6.3743 per dollar
- The Bloomberg Dollar Spot Index was little changed
- The euro traded at $1.1309
Bonds
- The yield on 10-year Treasuries held at 1.62%
- Australia’s 10-year bond yield increased seven basis points to 1.74%
Commodities
- West Texas Intermediate crude was at $76.03 a barrel
- Gold was at $1,805.65 an ounce, up 0.2%
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