Geoffrey Smith 

Investing.com – Bond yields increase around the world, as minutes from Federal Reserve’s recent policy meeting suggest a tighter monetary environment this year. While tech stocks will lose ground as they open later, financials and other cycles are doing better. The weekly jobless claims, and the Challenger job cut are two examples of a tightening labor force. Walgreens and Corona-brewer Constellation Brands report earnings. Russia and its allies will send troops to Kazakhstan in an attempt to stop violent protests which have seen several government buildings and police stations stormed across the country. This is what you should know about financial markets Thursday 6 January.

1. Fed minutes scare Bonds

Bond yields continued to head higher, putting fresh pressure on tech stocks and risk assets more generally, after the minutes from the latest Federal Reserve meeting 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 some 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.

In overnight trading, the benchmark 10-year yield rose to 1.74%. This is its highest point since April 2011. Three months ago, the 30-year yield hit a record high of 2.133%. That also pulled global bond yields higher, 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 initial jobless claims at 8:30 AM ET (1330 GMT) and the Challenger job cuts survey for December, which are both likely to confirm a picture of labor hoarding by businesses already struggling with capacity constraints.

On Wednesday, the ADP payrolls report came in twice what was expected. The cut-off date of the survey came helpfully before the Omicron strains of Covid-19.

The Institute of Supply Management’s non-manufacturing survey will be published. This will attract attention to what the report says about how rising labor costs affect service businesses and pricing decisions.

3 stocks set to open with mixed tech; technology set for pressure again

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

They were at 6.20 am ET and down 0.4% more than they had been in the previous four weeks. But, they held their ground, up 85 points (or 0.2%) due to an increase in bond yields, which support financial stocks.

The stocks that are most likely to be the focus of attention later include Nike Lululemon has been sued by the (NYSE:) 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 and Walgreens Boots (NASDAQ:).

4. Russia to send troops to Kazakhstan

Russia and its allies have sent troops to Kazakhstan in an effort to stop protests there that have claimed to have caused dozens of deaths within the last few 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.

Protests could disrupt oil and gas exports from Kazakhstan, as well from Turkmenistan to the south. Both countries are important suppliers of uranium to China. Kazakhstan is also a big exporter of and the world’s largest exporter of uranium.

The country’s largest onshore oil project, which is operated by a Chevron-led venture, has also been affected by the protests.  Protests broke out after 10^ThAnniversary of the massacre by striking oil workers at Zhanaozhen, perpetrated by security forces under then-President Nursultan Nazabayev. He has continued to hold power in secret since his departure from the presidency two year ago.

5. Kazakh Oil Rises, OPEC Worries

The developments in Kazakhstan resulted in crude oil prices rising. This was also due to the realization that Russia and OPEC had failed to deliver on their promises to boost oil production by February.

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.

Futures rose 1.4% to $78.98 per barrel by 6:30 ET while they were at $81.87 per barrel.