Dollar Rises; Asia Stocks Steady, U.S. Futures Dip: Markets Wrap

(Bloomberg) -- The dollar rose Monday and Asian stocks were steady as traders weighed the implications of higher U.S. Treasury yields amid President-elect Joe Biden’s push for huge fiscal aid to fight the impact of the pandemic.

The greenback climbed for a third day against major peers and Treasury futures were little changed. Japan’s equity market is shut for a holiday and cash Treasuries won’t trade until the London open. A gauge of Asia-Pacific shares edged higher, with South Korea outperforming. S&P 500 futures dipped.

U.S. stocks hit another record Friday after Biden said he’ll lay out proposals this week for trillions of dollars in fiscal support to fight the economic toll of surging virus cases. Oil held last week’s jump and gold added to losses.

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 that 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.”

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 U.S. Capitol.

One of the policy difficulties Biden will inherit at his inauguration next week is the escalating tension with Beijing. The Trump administration said Saturday the U.S. will remove self-imposed curbs on diplomatic interactions with Taiwan, a step likely to irk China, which 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 U.K. 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.

Elsewhere, Bitcoin retreated from Friday’s high of about $42,000.

Here are some key events coming up:

• JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co., as well as firms ranging from Taiwan Semiconductor Manufacturing Co. to Infosys Ltd., are among those due to report earnings.
• EIA crude oil inventory report is due Wednesday.
• European Central Bank’s Christine Lagarde speaks at an online conference Wednesday.
• U.S. consumer-price inflation figures are due Wednesday.
• Biden plans to lay out proposals for fiscal support on Thursday.
• Fed Chair Jerome Powell takes part in a webinar on Thursday.
• U.S. initial jobless claims data are due Thursday.
• U.S. retail sales, industrial production, business inventories and consumer sentiment figures are due Friday.

These are some of the main moves in markets:

Stocks

• S&P 500 futures slid 0.5% as of 10:45 a.m. in Tokyo. The S&P 500 index rose 0.6% on Friday.
• Australia’s S&P/ASX 200 index fell 0.6%.
• South Korea’s Kospi index advanced 2.7%.
• Shanghai Composite index dipped 0.6%.
• Hong Kong’s Hang Seng Index added 0.4%.

Currencies

• The Bloomberg Dollar Spot Index advanced 0.4%.
• The yen fell 0.2% to 104.18 per dollar.
• The euro slipped 0.3% $1.2180.
• The pound lost 0.4% to $1.3512.
• The offshore yuan fell 0.2% to 6.4795 per dollar.

Bonds

• The yield on 10-year Treasuries climbed four basis points to 1.12% on Friday.

Commodities

• West Texas Intermediate crude fell 0.4% to $52.02 a barrel.
• Gold dipped 1.2% to $1,827.48 an ounce.