Market News

By Tom Westbrook

Summary

• Anticipated rate hike in Japan triggers global bond selloff
• Strong auction of JGBs settle market nerves somewhat
• Cryptocurrency slump unsettles, bitcoin down 30% from October peak
• Dollar set to struggle as Fed prepares for rate cut - Deutsche Bank

SINGAPORE, Dec 2 (Reuters) - 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.

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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.
"The mood (in cryptocurrencies) is ranging between fearful and resigned," said Jehan Chu, founder at blockchain venture capital firm Kenetic Capital, with the latest drop catching investors by surprise.
"The next couple months are crucial but even the most bullish may be settling in to hibernate for the winter."
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.3% while Tokyo's Nikkei (.N225) crept 0.1% higher after logging a sharp drop on Monday. Advertisement · Scroll to continue South Korea's Kospi (.KS11) led gains in regional share gauges, adding 1.6%, while China's blue-chip CSI300 index (.CSI300) was down 0.8%.

JAPAN TO HIKE, FED TO CUT

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.

00:26Wall Street ends lower, crypto stocks drop

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. 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. "The U.S. data remains decent enough – but the rest of the world is on a firmer footing," said Deutsche Bank strategist Tim Baker, who sees scope for the dollar to fall towards year-end. "December has easily been the worst month for the dollar in the past decade. 

It's fallen 80% of the time, and by a median of more than 1%." 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.