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Bond Yields Rise, Jobless Claims, Kazakh Mayhem - What's Moving Markets By -

Bond Yields Rise, Jobless Claims, Kazakh Mayhem - What's Moving Markets © Reuters.

By Geoffrey Smith -- Bond yields rise around the world as the minutes from the Federal Reserve's latest policy meeting sketch out a more aggressive monetary tightening this year than previously expected. Tech stocks are expected to give up further ground when they open later but financials and other cyclicals are holding up better. Weekly jobless claims and the Challenger job cuts flesh out the picture from a tightening labor market. Corona-brewer Constellation Brands (NYSE:) and Walgreens both report earnings, and Russia and its allies are set to send troops into Kazakhstan to try to quell violent protests that have seen various government and police buildings stormed around the country. Here's what you need to know in financial markets on Thursday, January 6th.

1. Bonds spooked by Fed minutes

Bond yields continued to head higher, putting fresh pressure on tech stocks and risk assets more generally, after the raised the possibility of the Fed reversing some of the last two years’ asset purchases.

The minutes from the Fed’s December meeting not only indicated that the first interest rate this year may come as early as March, but also noted that some policy makers mooted the idea of selling part of the $8.7 trillion in bonds that the Fed has accumulated on its balance sheet over the last decade through its ‘quantitative easing’ policies.

The benchmark yield rose as high as 1.74% in overnight trading, its highest since April last year. The yield rose to a three-month high of 2.13%. That also pulled global bond yields higher, as investors were forced to reprice the risk of other central banks raising interest rates to keep pace with the Fed’s tightening.

2. Jobless claims, ISM services survey due

The series of labor market data releases continues with the publication of last week’s at 8:30 AM ET (1330 GMT) and the survey for December, which are both likely to confirm a picture of labor hoarding by businesses already struggling with capacity constraints.

The report on Wednesday came in at twice the expected number, as the cut-off date for the survey helpfully came before the first impacts of the Omicron strain of Covid-19.

Elsewhere, the Institute of Supply Management will publish its , which will draw attention for what it says about how higher labor costs are affecting service companies and their pricing decisions.

3 Stocks set to open mixed; tech set to come under pressure again

All of the above is likely to put fresh pressure on ‘profitless tech’ stocks in particular at the opening later.

As of 6:20 AM ET, were down another 0.4% at their lowest in four weeks, while were holding their own and were up 85 points, or 0.2%, with the rise in bond yields supporting financial stocks in particular.

Stocks likely to be in focus later include Nike (NYSE:), which has against athleisure-wear company Lululemon Athletica (NASDAQ:). Constellation Brands, the brewer of what has been for the last two years the world’s most unfortunately named beer, reports earnings later, as do ConAgra Foods (NYSE:) and Walgreens Boots (NASDAQ:).

4. Russia set to send troops into Kazakhstan

Russia and its allies that have reportedly led to dozens of deaths over the last two days. Protests against years of kleptocracy, triggered by the latest sharp rise in fuel prices, have flared up all around what is the world’s ninth-largest country.

The protests threaten to disrupt exports of oil and gas not just from Kazakhstan but also from Turkmenistan further south. Both are significant suppliers of to China. Kazakhstan is also a big exporter of and the world’s largest exporter of .

The country’s largest onshore oil project, which is operated by a Chevron-led venture, has also been affected by the protests.  The protests came after the 10th anniversary of a massacre of striking oil workers in the town of Zhanaozhen by the security forces of then-President Nursultan Nazarbayev, who has continued to exercise power behind the scenes since leaving the presidency two years ago.

5. Oil rises on Kazakh, OPEC worries

Crude oil prices rose in response to developments in Kazakhstan, and on the growing awareness that the promise by OPEC and Russia to raise oil output in February is likely to prove impossible to fulfil, due to past underinvestment.

Only two big producers in the world – Saudi Arabia and the United Arab Emirates - are currently able to pump more oil than they did two years ago, according to Goldman Sachs’ head of commodity research Jeff Currie.

That will make it difficult to replenish global inventories that are now below their five-year historic averages – unless the continued spread of Omicron-variant Covid-19 leads to more aggressive measures to reduce mobility, or at least less demand for travel. A sharp rise in U.S. gasoline inventories last week suggests that that is far from impossible

By 6:30 AM ET, futures were up 1.4% at $78.98 a barrel, while was up 1.3% at $81.87 a barrel.