U.S. Yields Hit Seven-Year High; Asia Stocks Mixed: Markets Wrap

Bloomberg.com — Ten-year U.S. Treasury yields hit a fresh seven-year high as they resumed trading after a holiday, posing a fresh test of investor appetites for riskier assets. Stocks in Asia were mixed, with China’s stock sell-off easing alongside a slump in Japanese shares.

Stocks in Shanghai were little changed after the biggest sell-off in more than three months, as investors weighed increasingly attractive valuations against deepening U.S.-China tensions. The yuan gained in onshore trading after sliding on Monday. A stronger yen left Japanese stocks under pressure. European equity futures tipped a muted open. The IMF’s first reduction in its outlook for global growth since 2016 underscored headwinds to stocks going forward — particularly outside the U.S., which continues to benefit from tax cuts.

The S&P 500 Index closed little changed Monday after reversing a slide, while the Nasdaq 100 Index fell to the lowest since August. The U.S. bond market was closed due to the Columbus Day holiday. Traders are now gearing up for $230 billion of Treasury auctions this week following last week’s sell-off.

China’s equities remained in focus after overseas investors dumped $1.4 billion of domestic Chinese shares through exchange links with Hong Kong Monday. Traders are on watch for whether the so-called national team of state-linked funds helps to prop up Chinese shares. Casting a cloud over Chinese assets has been festering tensions with the U.S., with the Treasury Department weighing whether to name China a currency manipulator.

U.S. Secretary of State Michael Pompeo had a testy exchange with Chinese officials during his trip to Beijing, which — unlike a visit in June — didn’t feature a meeting with President Xi Jinping.

“If the trade confrontation continues, the Chinese currency will go lower and that will create a whole host of problems for the global economy,” said Alicia Levine, chief strategist at BNY Investment Management.

Elsewhere, oil traded in New York advanced toward $75 a barrel. Iron ore futures in Dalian jumped to the highest level in almost three weeks on demand. South Korea’s market is closed for a holiday Tuesday. Brazil’s stocks rallied after far-right Army captain and investor favorite Jair Bolsonaro took a commanding lead in the first round of the nation’s presidential election. In Europe, Italy’s 10-year bond yield ratcheted up to a four-year high and banking stocks sold off as the populist government refused to bow to European Union criticism over its planned budget.