Stocks slump amid inflation concern; oil tumbles – BNN

Stocks fell from record highs, oil slumped and Treasury yields touched some of the highest levels in more than a year amid concern the Federal Reserve risks letting inflation accelerate.

The rout in risk assets picked up in the afternoon, starting with a selloff in crude. Oil plunged 8 per cent on concern new restrictions in Europe will hamper demand. Two weeks ago it soared past US$65 a barrel to the highest in almost two years.

The spike in Treasury yields dented demand for tech shares with high valuations, sending the Nasdaq 100 Index tumbling 3.1 per cent. Swings in asset prices also picked up as they often do around major expirations of options and futures contracts, such as tomorrow’s ‘quadruple witching’ event.

“We’re seeing a pattern where an uncomfortable spike in the 10-year Treasury reminds equity investors that their tech stocks are trading well above average,” said Mike Bailey, director of research at FBB Capital Partners.

Ten-year Treasury yields climbed to 1.75 per cent for the first time since January 2020, while the 30-year breached 2.5 per cent for the first time since August 2019 in the wake of Wednesday’s Federal Reserve meeting. Fed Chairman Jerome Powell’s apparent willingness to keep pumping support into the economy and let it run hotter has spurred bets on faster growth and inflation, sending market expectations of price pressures to multi-year highs.

Oil plunged as vaccination efforts in some parts of the world stalled, casting uncertainty over the speed of an economic recovery and a full rebound in global oil demand. West Texas Intermediate crude futures declined for a fifth session, the longest stretch of daily losses in more than a year.

In Asia and Europe, stocks were boosted by lingering enthusiasm from the Fed’s outlook for stronger growth. Automakers and banks, which tend to outperform during cyclical upswings, were higher in Europe. Japan’s Topix jumped past the 2,000 mark for the first time since 1991, becoming the region’s top-performing major equity index this year.

Japan’s government bond yields rose on a Nikkei report that the Bank of Japan is considering widening the trading range around the 10-year target, which could spur concerns about policy tightening.

These are some key events this week:

Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing Friday.

These are some of the moves in markets:

Stocks

The S&P 500 Index sank 1.5 per cent to 3,915.50 as of 4:02 p.m. New York time, the lowest in more than a week on the largest tumble in three weeks.

The Dow Jones Industrial Average sank 0.5 per cent to 32,862.37, the biggest dip in two weeks.

The Nasdaq Composite Index sank 3 per cent to 13,116.17, the lowest in more than a week on the largest tumble in three weeks.

The Nasdaq 100 Index sank 3.1 per cent to 12,789.14, the lowest in more than a week on the biggest tumble in three weeks.

The Stoxx Europe 600 Index rose 0.4 per cent to 426.59.

Currencies

The Bloomberg Dollar Spot Index rose 0.5 per cent to 1,139.39, the biggest advance in more than a week.

The euro fell 0.5 per cent to US$1.1915, the largest fall in more than a week.

The British pound fell 0.3 per cent to US$1.3928.

South Africa’s rand weakened 0.9 per cent to 14.7799 per dollar, the largest fall in more than a week.

Bonds

The yield on two-year Treasuries gained two basis points to 0.16 per cent, the highest in more than a week on the biggest advance in more than a week.

The yield on 10-year Treasuries jumped eight basis points to 1.72 per cent, the highest in about 14 months.

The yield on 30-year Treasuries gained five basis points to 2.47 per cent, the highest in almost 20 months.

Germany’s 10-year yield climbed three basis points to -0.26 per cent, the highest in almost three weeks.

Britain’s 10-year yield increased five basis points to 0.875 per cent, the highest in more than 21 months.

Commodities

West Texas Intermediate crude sank 8 per cent to US$59.41 a barrel, hitting the lowest in almost four weeks with its fifth straight decline and the largest tumble in 11 months.

Gold weakened 0.6 per cent to US$1,734.60 an ounce, the biggest fall in more than a week.

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