SYDNEY / NEW YORK-JANUARY 12 (Reuters) – Shares took off on Tuesday, falling from record highs as political turmoil in Washington and rising coronavirus cases came to a halt as sales in US treasuries expanded as investors consider the government to be spending heavily.
The US government’s 10-year benchmark debt yield, which is rising as prices fall, gained up to 2.4 basis points, to a new ten-month high of 1.1580%.
The largest MSCI index of Asia-Pacific equities outside Japan fell 0.5% after hitting an all-time high on Monday, driven by a 2.6% drop in South Korea as investors made a profit from Kospi growth.
Drug makers have taken Japan’s Nikkei to a new level for three decades, after reports of another effective COVID-19 treatment, although the index fell 0.16% less in the afternoon.
Strong entries helped the Chinese chips 1.11% higher.
The S&P 500 futures were 0.05% weaker, and the FTSE futures in London were 0.13% lower in Asia on Tuesday.
The resurgent US dollar has clung to four-day gains against other major currencies, keeping the euro and yen close to lows for several weeks.
“We’ve seen a very strong week like this (in stock) and I think the smaller moves we’re seeing are unprofitable,” said Chad Padowitz, chief investment officer at Talaria Capital in Melbourne.
“I don’t think higher interest rates or inflation expectations are currently an area of concern for stocks.”
Political uncertainty has somewhat tempered the mood, while Democrats have introduced a resolution accusing US President Donald Trump of inciting insurrection following a violent attack on the Chapter last week.
Overnight, the Nasdaq led to modest losses on Wall Street, down 1.3%, as investors sold tech giants who took action against Trump and his supporters.
Twitter fell 6.4 percent on Monday after permanently suspending Trump’s account last Friday.
SHORT SHORT
The US yield curve is worsening as investors expect a high-spending, high-borrowing U.S. government after Democrats gained control of both houses of Congress last week.
The 10-year US debt yield has increased by 23 basis points already this year, and the difference between the two-year and 10-year Treasury yields is now more than 100 basis points for the first time since July 2017.
“Treasuries have returned to March levels,” said Mark Beardow CIO of Darling Macro in Sydney.
“What differs between now and then is clearly the situation around COVID, Fed policy and the key element was the new US government, but some of these other factors could reaffirm in the short term.”
Huge and sudden sell-off sustained stocks as they hit the brakes of short dollar positions. The renewed focus on inflation expectations will make investors closely monitor US CPI data, which will be released on Wednesday.
Meanwhile, the dollar index jumped 1.5% from a three-year low last week, while investors are reducing what have become very large short positions.
Elsewhere, investors are expected to be guided on the extent to which directors are recording a return to earnings and savings in 2021 from results and conferences at JP Morgan, Citi and Wells Fargo on Friday.
American crude oil was slightly lower at $ 52.16 a barrel, and Brent was 0.22% lower at $ 55.54.
Gold that was sold as US yields increased because it pays no interest was set at $ 1,850 an ounce.
Report by Paulina Duran in Sydney and Chibuike Oguh in New York. Written by Tom Westbrook; Editing by Sam Holmes and Lincoln Feast