Stocks, Treasury Yields Rise as Crude Oil Climbs: Markets Wrap

(Bloomberg) — Treasury yields rose and stocks in Asia stabilized Tuesday as investors weighed higher energy costs and an inflation outlook that’s prompting a slew of central banks to keep hiking interest rates.

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Shares climbed in Japan, Australia and South Korea. US equity futures pushed higher ahead of the resumption of Wall Street trading after a holiday. Treasuries dipped across the curve, taking the 10-year yield to 3.21%.

Crude oil has climbed to about $89 a barrel after OPEC+ agreed to cut 100,000 barrels a day in October. Natural gas prices surged in Europe on Monday, hurting the region’s shares, after Russia kept the Nord Stream pipeline offline.

A dollar gauge edged back while remaining in sight of a record level. The pound climbed as markets digested Liz Truss’ victory in the race to succeed Boris Johnson as UK prime minister. The euro found some relief after sliding to a two-decade low Monday, roiled by Europe’s energy woes.

The offshore yuan advanced after China on Monday announced a cut in the amount of foreign-exchange deposits banks must set aside as reserves, a move to aid the currency after it slid to a two-year low.

The next leg in a wave of monetary tightening is due in Australia, where economists expect the central bank to lift the policy rate by a further 50 basis points. Tightening financial conditions globally are weighing on stocks and bonds.

The dollar can find more support against the backdrop if “further negative headlines emerge on Europe’s energy crisis and/or China’s Covid situation,” Carol Kong, strategist at Commonwealth Bank of Australia, wrote in a note.

Aside from unveiling a foreign-exchange reserve ratio cut, officials in China also said they will speed up the roll out of stimulus in the third quarter. Beijing is stepping up support for an economy saddled with Covid lockdowns, a property-sector slump and power shortages.

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