Stocks were mixed Tuesday amid a selloff in China and sovereign bonds were again on the back foot as traders calibrated risks from a global wave of monetary tightening.
China’s CSI 300 equity gauge fell some 2% and shares also struggled in Hong Kong, where Wuxi Biologics Cayman Inc. sank after being added to a list of companies that may need extra permits to buy products from U.S. entities.
S&P 500 and Nasdaq 100 futures edged up, while European contracts were steady. Wall Street on Monday ended a choppy session in the red, dragged down by technology stocks such as Meta Platforms Inc.
Yields on Treasuries as well as bonds from Australia and New Zealand pushed higher amid a global bond selloff on the prospect of interest-rate hikes to fight inflation. Japan’s government bond yields are in sight of the upper limit of the central bank’s tolerance level, setting the stage for a potential intervention.
Oil’s scorching rally took a breather, with attention turning to Iran nuclear talks that could lead to a resumption of official crude exports from the Persian Gulf producer. The dollar was stable and Bitcoin held gains near $44,000.
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Investors are awaiting data Thursday expected to show stubbornly high U.S. inflation, which could inject further volatility into financial markets bracing for an aggressive Federal Reserve monetary tightening cycle.
“Markets will get used to the tightening regime at some point,” Chris Iggo, chief investment officer, core investments at AXA Investment Managers, wrote in a note. “The growth and earnings forecast revisions in the next few months will be key.”
Global stocks are down about 5% so far this year, while sovereign debt has retreated from Europe and the U.S. to Australia.
Investors are grappling with the likely broader impact of Fed policy, “particularly within credit markets,” Kristen Bitterly, head of North America investments at Citi Global Wealth, said on Bloomberg Television.
“That is what most investors are looking at right now in terms of what can actually interject volatility into the broader market,” she said.
Elsewhere, traders were monitoring a flurry of diplomacy involving the French, Russian, U.S. and German leaders, trying to assess if the tension over Ukraine can be defused. - Bloomberg.
