Business Maverick

Business Maverick

Asian stocks drop, US yields steady: markets wrap

Asian stocks drop, US yields steady: markets wrap
Pedestrians on the Bund across from commercial buildings in Pudong's Lujiazui Financial District in Shanghai, China, on Monday, April 15, 2024. (Photo: Raul Ariano/Bloomberg)

Asian stocks and bonds fell on Thursday, mirroring declines in the US, after another weak sale of Treasuries reinforced concerns about the impact of higher yields.

Japanese equities led losses in the region on Wednesday, with the MSCI Asia Pacific Index down to its lowest in three weeks. Futures contracts for US equities also slipped in Asian trading after the S&P 500 ended on Wednesday back below 5,300, while the Nasdaq 100 had its worst day since 1 May.

Treasuries steadied on Thursday after falling across the curve following tepid demand in the $44-billion sale of seven-year securities. The result boosted worries that funding the US deficit will drive up yields at a time when the Federal Reserve is in no rush to cut rates. Japanese, Australian and New Zealand debt tracked the moves early on Thursday.  

“Asian equity markets are set to start the day on the back foot following falls on Wall Street and as the deepening rout in global bond markets sap risk appetite,” said Tony Sycamore, market analyst at IG Australia in Sydney.

Rising Treasury yields have driven the dollar higher, in turn hitting the Japanese and Chinese currencies this week. A gauge of dollar strength was little changed on Thursday after jumping to a two-week high in its previous session. 

In Japan, the yen advanced after weakening as much as 0.3% to beyond 157.52 per dollar on Wednesday, falling through a level that had prompted the latest round of suspected action. The nation’s 10-year yield has added nine basis points this week amid concern the Bank of Japan will slow its bond buying.  

Elsewhere in currencies, China’s onshore yuan fell to the lowest level since November on Wednesday as the central bank let it decline against a resilient dollar through a weaker daily reference rate. Meanwhile, South Africa’s rand weakened 0.3% against the dollar on Thursday as the country went to polls to elect its next parliament and government.

Treasury 10-year yields climbed six basis points to 4.61% on Wednesday. European bonds also tumbled, sending yields to multi-month highs after inflation in Germany quickened more than expected, denting bets on a faster pace of rate cuts.

“Bond yields may be moving higher mainly due to supply of bonds and the continued massive deficit — and not because of a concern around inflation or strong economy,” said Eric Johnston at Cantor Fitzgerald.

The US economy expanded at a “slight or modest” pace across most regions since early April and consumers have pushed back against higher prices, the Fed said in its Beige Book survey of regional business contacts.

Meanwhile, Fed chair Jerome Powell and his colleagues have stressed the need for more evidence that inflation is on a sustained path to their 2% goal before cutting the benchmark interest rate, which has been at a two-decade high since July.

In the corporate world, Salesforce Inc.’s shares slumped in extended trading after the software giant’s outlook for the current quarter missed estimates. HP Inc. reported revenue that topped estimates, including the first increase in PC sales in two years. Elsewhere, BHP Group abandoned its bid for Anglo American Plc.

In commodities, oil was steady after retreating on Wednesday, with broader risk-off sentiment offsetting heightened tensions in the Middle East before an OPEC+ supply meeting on Sunday.

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