Asian markets went into reverse yesterday, tracking fresh losses on Wall Street as investors fret about rising US Treasury yields and speculation that interest rates will rise four times this year.
Technology firms were once again in the firing line in response to a plunge in Google parent Alphabet on costs worries, while Apple shares suffered a fifth straight loss because of concerns over the crucial smartphone sector.
The yield on benchmark 10-year Treasuries broke 3% on Tuesday for the first time in more than four years as surging oil prices and the impact of Donald Trump’s huge tax cuts fan inflation expectations.
There is a fear the higher yields will divert investor attention from equities as safe-bet government debt looks more attractive.
That, along with an improving economy, has fanned talk the Federal Reserve will have to raise borrowing costs more than expected this year.
The dollar built on gains against its peers on expectations of higher rates. Wako Ogawa, director of foreign exchange sales at Deutsche Securities, told Bloomberg News: “I expect a further rise in Treasury yields to continue to spur buying of the dollar.”
All three main indexes in New York ended deep in the red Tuesday, with the Dow clocking up a fifth successive loss. Sentiment was also dented when construction and mining equipment giant Caterpillar gave a subdued earnings outlook.
“The sudden surge in US yields had already been weighing on equity sentiment, but when you factor in the skid in technology stocks and Caterpillar’s less than reassuring outlook, it makes for a very rough day on the trading floor,” said Stephen Innes, head of Asia-Pacific trading at OANDA. Tokyo ended 0.3 % lower at 22,215.32 as a weaker yen was unable to provide support, while pharmaceutical giant Takeda plunged 7% after it ramped up its offer for Irish rival Shire.
Hong Kong shed 1% at 30,328.15 and Shanghai slipped 0.4% to 3,117.97 yesterday. Singapore dropped 0.7%, Seoul was 0.6% off and Taipei lost 0.2%. Sydney and Wellington were closed for ANZAC Day.
Technology firms were among the worst performers again after a big sell-off in their US counterparts including Apple, Amazon, Alphabet, Facebook and Microsoft. Hong Kong-listed AAC Technologies tumbled 2.5%, Apple supplier TSMC shed 0.9% in Taipei and South Korean titan Samsung eased 0.1%. On oil markets both main contracts extended Tuesday’s losses after Trump and Emmanuel Macron – during a state visit by the French president – called for a “new” nuclear deal with Iran.
The comments come as the US president prepares to say whether he will stick with a three-year old agreement designed to curb Iran’s nuclear programme. Talk that he will reimpose sanctions on Tehran have helped push prices up in recent weeks. Data showing a rise in US crude stockpiles added to selling pressure.
Pedestrians walk past a stock indicator showing share prices of the Tokyo Stock Exchange. The index closed 0.3 % lower at 22,215.32 points yesterday.
