Stocks Unsteady Over Bond, Bitcoin Selloffs

Stocks made muted gains and traders were wary on Tuesday, following a slide in cryptocurrencies and a global bond selloff triggered by a looming interest rate hike in Japan.

S&P 500 futures were steady after falls on Wall Street overnight, while Japanese government bonds steadied a little after a strong auction of JGBs following a weeks-long tumble on concern about the nation’s fiscal outlook.

Ten-year JGB yields touched a 17-year peak of 1.88%, while 30-year yields reached an all-time high. The 10-year yield was slightly down 1 bp at 1.865% after the auction results were out.

Bitcoin, which has been a talisman for sentiment, bounced higher after an unsettling 5.2% slump on Monday and at $87,000 is down 30% from an October peak.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3% while Tokyo’s Nikkei crept 0.1% higher after logging a sharp drop on Monday.

South Korea’s Kospi led gains in regional share gauges, adding 1.6%, while China’s blue-chip CSI300 index was down 0.8%.

Reuters reported expectations that Japan will hike interest rates later this month had surged on Monday when Bank of Japan Governor Kazuo Ueda laid the groundwork for tightening policy.

Ten-year JGB yields shot six bps higher, and perhaps on the view that could lure home some of Japan’s vast international investments, traders sold global bonds and pushed ten-year Treasury yields up 7.7 bps to 4.096%.

The 10-year Treasury yield fell back to 4.087% in Asian trading.

Bitcoin rallied 0.6% to $86,965.30, while ether rose 0.3% to $2,800.42.

The yen caught a boost and has stood firmest in foreign exchange markets over the past 24 hours, holding at 155.64 per dollar on Tuesday.

The move helped hoist the euro briefly above $1.165 and left the dollar on the back foot more broadly. It traded at $1.161 versus the common currency while markets waited on eurozone inflation data due later in the session.

Some investors, however, are starting to expect a more durable turn lower for the greenback as the U.S. prepares to cut interest rates further and faster than many peers.

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Data on Monday supported expectations for a December rate cut by the Federal Reserve, with manufacturing contracting for a ninth straight month in November – though consumers did beat analyst expectations with a $23.6 billion online shopping spree to kick off the holiday season.

Gold hung on to recent gains at just above $4,200 an ounce. Oil prices had also climbed following drone attacks on Russian supply, and Brent crude futures held steady at $63.17 a barrel on Tuesday.