Stocks Fall, Bonds Up Amid Growth, Inflation Risks: Markets Wrap

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(Bloomberg) — Asian stocks fell Wednesday while Treasuries retained gains amid concerns about the outlook for the recovery from the pandemic as price pressures filter through the global economy.

Shares retreated in Japan, Hong Kong and China, where data showed the economy weakened further in August as the government took steps to contain a Covid-19 outbreak. An index of Macau casino stocks slumped on steps to increase oversight, the latest escalation in Beijing’s regulatory clampdown. U.S. futures wavered after declines in the S&P 500 and Nasdaq 100.

The 10-year Treasury yield has fallen to 1.28%, narrowing the yield gap between short- and longer-maturity U.S. debt. Bonds in Australia and New Zealand rose. The yen climbed.

U.S. inflation was less than forecast in August while remaining elevated, leaving the argument about whether pandemic-related prices pressures are transitory undecided. Some investors viewed the data as affording the Federal Reserve more flexibility on when to start tapering stimulus.

While the inflation print could be seen as easing pressure on the Fed to start pulling back on loose monetary policy, investors remain concerned about the impact of the delta virus variant and rising costs on economic reopening. Fund managers are souring on global growth and earnings but won’t give up on stocks, the latest Bank of America survey showed.

“It is hard to argue at this point that it remains entirely transitory,” Dana D’Auria, Envestnet Inc. co-chief investment officer, said on Bloomberg Television, referring to U.S inflation. “You couple that with that fact that there are still all these supply shocks that we are still working through. I think the markets are going to have to feel the pain.”

Going into the year-end, investors will also have to digest debate around the U.S. debt ceiling, President Joe Biden’s tax package, infrastructure spending and Fed tapering, she added.

Elsewhere, oil gained after a U.S. industry report showed a decline in inventories of crude and gasoline, signaling a tightening market. Gold held a climb.

Here are some events to watch this week:

Quadruple witching day for U.S. markets, Friday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.1% as of 11:06 a.m. in Tokyo. The S&P 500 fell 0.6%Nasdaq 100 futures slipped 0.1%. The Nasdaq 100 fell 0.3%Japan’s Topix index fell 1.4%Australia’s S&P/ASX 200 Index dropped 0.5%South Korea’s Kospi index shed 0.3%Hong Kong’s Hang Seng Index fell 1.3%China’s Shanghai Composite Index dropped 0.3%

Currencies

The Japanese yen traded at 109.58 per dollar, up 0.1%The offshore yuan was at 6.4408 per dollarThe Bloomberg Dollar Spot Index was little changedThe euro was at $1.1807

Bonds

The yield on 10-year Treasuries held at 1.28%Australia’s 10-year bond yield fell five basis points to 1.21%

Commodities

West Texas Intermediate crude was at $70.78 a barrel, up 0.4%Gold was at $1,802.97 an ounce

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