A fresh bout of bond volatility hit markets on Friday, sparking a risk-off mood that sent technology stocks sharply lower. The dollar jumped.
Futures on the Nasdaq 100 gauge slumped after accelerating vaccinations in the U.S. and the passage of the $1.9 trillion pandemic-relief bill sent Treasury yields surging. The tech-heavy index dropped as much as 2% as the Treasury 10-year yield hit 1.6%. A Bloomberg report that Beijing is expanding a crackdown on Tencent Holdings Ltd. also weighed on the technology sector.
European shares dropped, with tech the biggest decliner following the Tencent news. A resurgence of the virus in Italy coupled with division over AstraZeneca Plc’s Covid-19 vaccine also hit sentiment. Burberry Group Plc rose following an announcement that the rebound in its fourth quarter has been stronger than analysts expected.
Markets were jolted on Friday by the surge in yields, after relatively smooth bond sales this week had eased concerns on the fixed-income outlook. The wave of stimulus and vaccine rollout in the U.S. is once more forcing investors to confront the prospect of excessive inflation. The focus now turns to Friday’s U.S. producer-price data and the Federal Reserve decision next week.
“We think the U.S. 10-year yield has further room to go and could reach 1.80%,” said Sebastien Galy, a senior macro strategist at Nordea Investment Funds. “Growth stocks maintain a high sensitivity to rates, which continues to suggest that they are quite overvalued.”
Elsewhere, European debt dropped after authorities were said to have no intention of expanding stimulus despite their pledge to keep yields in check. Oil hovered around $66 a barrel.
These are the main moves in markets:
- Futures on the S&P 500 Index declined 0.5% as of 10:42 a.m. London time.
- The Stoxx Europe 600 Index declined 0.4%.
- The MSCI Asia Pacific Index climbed 0.1%.
- The MSCI Emerging Market Index dipped 0.4%.
- The Bloomberg Dollar Spot Index rose 0.5%.
- The euro sank 0.5% to $1.1923.
- The British pound decreased 0.4% to $1.3929.
- The onshore yuan weakened 0.2% to 6.508 per dollar.
- The Japanese yen weakened 0.5% to 109.03 per dollar.
- The yield on 10-year Treasuries rose six basis points to 1.59%.
- The yield on two-year Treasuries climbed one basis point to 0.15%.
- Germany’s 10-year yield increased two basis points to -0.32%.
- Britain’s 10-year yield climbed five basis points to 0.786%.
- Japan’s 10-year yield gained two basis points to 0.123%.
- West Texas Intermediate crude climbed 0.3% to $66.22 a barrel.
- Brent crude increased 0.4% to $69.90 a barrel.
- Gold weakened 1% to $1,704.99 an ounce.
— With assistance by Emily Barrett, John Ainger, and Carolynn Look