The dollar rises on Monday and most Asian stocks slipped along with US equity futures as traders weighed the implications of higher Treasury yields amid President-elect Joe Biden’s push for huge fiscal aid.
The dollar climbed a third day against major peers. A gauge of Asia-Pacific shares dipped, South Korea erased an advance of as much as 3.6%. S&P 500 and European futures ticked lower. Japan’s equity market was closed for a holiday. Bitcoin plunged, retreating rapidly from last week’s high of about $42,000.
The equity rally has paused at the start of the week as investors evaluate stretched valuations and some signs that global shares may be running too hot. Stocks and Treasury yields have climbed on expectations of a global recovery driven by stimulus and eventual control of the pandemic with the help of vaccines. Higher yields could buoy demand for the dollar.
“After being bullish for several months, we are definitely becoming more cautious on the stock market up at these levels,” Matt Maley, the chief market strategist at Miller Tabak + Co., wrote in a note. He added the “dollar is so extremely oversold, over-hated, and over-shorted that it all but has to rally for a while at some point soon.”
US stocks hit a record last week after Biden said he’ll lay out proposals this week for trillions of dollars in fiscal support to counter the economic toll of surging virus cases. Oil pared some of last week’s jump and gold fell further.
The Democratic Party under Biden is set to control both houses of Congress once he takes charge, but winning assent for ambitious outlays — such as $2,000 stimulus checks — may yet be a challenge in a Senate that will be split 50-50 with Republicans. Meanwhile, President Donald Trump enters the final days of his presidency facing a possible impeachment resolution after being blamed for inciting last week’s deadly riot at the US Capitol.
Biden’s looming policy tasks after his inauguration next week include handling escalating tension with Beijing. China’s state-run media called for retaliation after the Trump administration said the US will remove self-imposed curbs on diplomatic interactions with Taiwan. China claims the island as its territory.
On the virus front, Japan said it found a new strain of the coronavirus with similarities to the variants in the UK and South Africa. The Asian nation said it’s difficult to immediately determine how infectious the strain is or the effectiveness of current vaccines against it.