Asia stocks start cautious, Treasury yields continue to rise

A man stands on an overpass with an electronic board displaying the Shanghai and Shenzhen stock indexes, at the Lujiazui financial district in Shanghai, China January 6, 2021. REUTERS/Aly Song//File photo

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  • >Asian Stock Markets:
  • Nikkei Flat, China Holiday Markets
  • There is talk of more sanctions on Russia, end of gas sales
  • Treasury yield curve inverts on recession warning

SYDNEY, April 4 (Reuters) – Asian stock markets got off to a cautious start on Monday amid talk of new sanctions against Russia over its invasion of Ukraine, while bond markets continued to sound the risk of a hard landing for the economy. American. short-term yields increased.

A holiday in China made trading slow and the broadest MSCI index of Asia-Pacific stocks out of Japan (.MIAPJ0000PUS) submerged 0.1%.

japan nikkei (.N225) was flat, while S&P 500 stock futures fell 0.2% and Nasdaq futures fell 0.3%.

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As peace talks between Russia and Ukraine dragged on, reports of Russian atrocities prompted Germany to say the West would agree to impose more sanctions in the coming days. Read more

Germany’s defense minister also said the European Union should discuss a ban on imports of Russian gas, a step that would likely drive up prices further and force some form of energy rationing in Europe. Read more

Data released last week showed inflation in the EU had already hit an all-time high, mounting pressure on the European Central Bank to rein in runaway prices even as growth slows sharply.

“It really looks like it’s time for the ECB to act,” ANZ analysts warned in a note. “While the ECB will be cautious about raising rates, it certainly looks like it should move sooner to abolish its QE program.”

The US Federal Reserve is already higher and is expected to do much more after Friday’s strong March payrolls report. There are plenty of Fed officials speaking at public events this week, with the prospect of more aggressive noise, and the minutes of the latest policy meeting are due on Wednesday.

“We now expect the Fed to hike 50bps in May, June and July, before slowing slightly with 25bps hikes in September, November and December,” said Kevin Cummins, chief US economist at NatWest Markets.

“This will take the funds rate into tight territory sooner, at 2.50-2.75% by the end of 2022.”

Investors reacted by hitting short-dated Treasuries and further inverting the yield curve as the market priced in the risk that all this tightening would eventually lead to a recession.

On Monday, two-year yields rose to three-year highs of 2.49% and well above 10-year yields at 2.410%.

The jump in yields has supported the US dollar, particularly against the yen as the Bank of Japan repeatedly moved last week to keep its bond yields close to zero.

The dollar was trading firm at 122.63 yen and not far off its recent seven-year high of 125.10. The euro slipped to $1.1041 and could fall further if the EU actually acts to stop gas flows from Russia, which calls its action in Ukraine a “special operation”.

The dollar index was last at 98.617, having recently bounced between 97.681 and 99.377.

Rising global bond yields have been a drag on gold, which pays no return, with the metal stalling at $1,923 an ounce.

Meanwhile, oil prices fell after the United Arab Emirates and the Iran-aligned Houthi group welcomed a truce that would halt military operations on the Saudi-Yemen border, easing some concerns about potential supply problems. .

Oil fell 13% last week, the biggest weekly drop in two years, after US President Joe Biden announced the largest oil stock release in US history.

Brent last traded 86 cents lower at $103.53, while US crude was down 80 cents at $98.47.

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Edited by Kenneth Maxwell

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