European stocks dropped with US equity futures on Tuesday as the jump in bond yields and commodity prices continued to hammer technology shares.
The Stoxx 600 Index turned lower, with tech among the laggards for a second straight day while energy shares outperformed. HSBC Holdings Plc edged lower even after results beat estimates in the fourth quarter. Hong Kong stocks outperformed, while Japan was shut for a holiday. In the US, Nasdaq futures led declines after the tech-heavy gauge posted its longest losing streak in four months.
Budding inflation bets spurred by the global economic recovery have added to scrutiny on stocks that have led the rally from the depths of the pandemic a year ago. Treasury yields edged up on Tuesday after the gap between 5- and 30-year yields touched the highest level in more than six years. Copper extended gains, while WTI crude rise towards $63 a barrel.
One concern among investors is that broad benchmarks have already priced in much of the prospective global recovery spurred by vaccines and US stimulus. Another is that central banks may eventually start reconsidering emergency programs that have supported global markets.
“The timing of a pullback is even more uncertain than we previously understood,” said Lori Calvasina, head of US equity strategy at RBC Capital Markets. “One has the potential to start at any time, but may not emerge until the second half given a lack of near-term catalysts. We don’t view the recent rise in 10-year yields as a reason to turn negative on US equities for the year.”
Traders are waiting to hear from Federal Reserve Chair Jerome Powell when he testifies to the Senate Banking Committee and the House Financial Services panel the following day. He’s expected to play down the risk of inflation despite the size of President Joe Biden’s $1.9 trillion coronavirus relief proposal.
Elsewhere, Bitcoin retreated below $50,000 after a bout of volatility highlighted lingering doubts about the durability of the token’s rally.
Futures on the S&P 500 Index dipped 0.1% as of 9:16 am London time and the Stoxx Europe 600 Index fell 0.6%.
While the MSCI Asia Pacific Index advanced 0.2%, the MSCI Emerging Market Index was little changed.
The Bloomberg Dollar Spot Index was little changed and the euro was little changed at $1.2152.
While the British pound advanced 0.1% to $1.4074, the onshore yuan strengthened 0.1% to 6.461 per dollar. The Japanese yen weakened 0.2% to 105.24 per dollar.
The yield on 10-year Treasuries gained one basis point to 1.37% and the yield on two-year Treasuries dipped less than one basis point to 0.11%.
While Germany’s 10-year yield advanced four basis points to -0.30%, Britain’s 10-year yield jumped four basis points to 0.721%. Japan’s 10-year yield was unchanged at 0.125%.
West Texas Intermediate crude increased 1% to $62.30 a barrel and Brent crude gained 1.2% to $66.03 a barrel. Gold weakened 0.1% to $1,808.12 an ounce.