NEW YORK/SINGAPORE- Ten-year Treasury yields hit 14-month highs, driving a spike in the dollar and a wave of selling in technology stocks which spread to Asia in early trade, with Japan’s Nikkei sliding after a holiday break and US inflation data on investors’ minds.
The benchmark 10-year yield steadied at 4.77 percent after hitting 4.805 percent in New York trade, the highest since early November 2023. US equity futures also steadied, with S&P 500 futures up 0.25 percent and Nasdaq 100 futures up 0.5 percent early on Tuesday in Asia.
The Nikkei slid 1.5 percent, while shares in Hong Kong China and Australia made modest gains.
On Monday, the Nasdaq had dropped 0.4 percent and touched a two-month trough, while the benchmark S&P 500 bounced off a two-month low to finish with a slight gain.
The US dollar index hit its highest in more than two years on Monday, before retreating a little on a Bloomberg News report that the incoming Donald Trump administration was discussing a gradual, rather than sudden, tariff plan.
Market nerves have been running high since an unambiguously strong US payrolls report sent up yields and decreased the market odds of Federal Reserve interest rate cuts.
Investors also worry whether inflation could pick up as a result of policies on tariffs, migration and taxes of US President-elect Donald Trump’s incoming administration.
The stakes are high for US consumer price figures on Wednesday where any rise in the core greater than the forecast 0.2 percent would threaten to close the door on easing altogether.
“It’ll be touch and go for the next couple of days until we get the inflation news out of the way,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“The Fed has become more hawkish at this time,” and investors are considering the possibility that the US may have seen the end of rate cuts for now, he said. Markets are pricing just 29 basis points of cuts from the Fed this year.
Not helping has been a spike in oil prices to four-month highs amid signs of weaker shipments from Russia as Washington stepped up sanctions on the country.
Benchmark Brent futures have shot though their 200-day moving average and stayed above $80 at $80.73 a barrel on Tuesday.