Asian stocks fall as rising US yields hit tech companies

Monitors showing stock index prices and the exchange rate of the Japanese yen to the US dollar can be seen after the New Year’s ceremony marking the opening of trade in 2022 on the Tokyo Stock Exchange (TSE), in the middle of the coronavirus disease (COVID-19) pandemic, in Tokyo, Japan, January 4, 2022. REUTERS / Issei Kato

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HONG KONG, Jan.5 (Reuters) – Asian stocks fell on Wednesday after a mixed session on Wall Street as rising US Treasury yields weighed on global tech companies and pushed the dollar to a five-year high against the Japanese yen.

U.S. yields rose on Tuesday as bond investors braced for interest rate hikes from the Federal Reserve by mid-year to curb stubbornly high inflation.

The largest MSCI Asia-Pacific stock index outside of Japan (.MIAPJ0000PUS) was down 0.8%, while Japan’s Nikkei (.N225) was little changed.

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US equity futures also slipped, with S&P 500 e-minis down 0.25% and Nasdaq e-minis down 0.4%.

“From an Asian perspective, it’s a slightly riskier tone because it’s one of those days when higher bond yields are a bad thing, because even though they reflect a stronger US backdrop , they tend to support the dollar rather than the local currencies, ”said Rob Carnell, Asia-Pacific research manager at ING.

“But it’s pretty choppy, tomorrow we might start to think again that higher yields reflect a stronger global backdrop,” Carnell said.

He said overnight Nasdaq declines due to higher yields weighed on Asian stock markets, given the increased importance of tech stocks in the region.

Hong Kong-listed tech stocks (.HSTECH) fell 3.7% at the start of trading while in Japan, Nintendo (7974.T) slipped 1% and in South Korea, Samsung (005930.KS) lost 2% ahead of its quarterly results. Read more

US stocks were mixed on Tuesday, with the tech-heavy Nasdaq (.IXIC) losing 1.3%, although higher yields boosted banks and industry names helped the Dow Jones Industrial Average (.DJI) to a low record closing and the S&P 500 (.SPX) to hit an all-time intraday high.

US five-year bonds, which reflect expectations of rate hikes, hit their highest level since February 2020, after yields on two-year US bonds hit their highest level since March 2020 on Monday.

Benchmark 10-year US Treasury yields hit a six-week high on Tuesday and were last at 1.657%.

The minutes of the December Fed meeting, scheduled for 19:00 GMT, could underline the new sensitivity of US policymakers to inflation and their willingness to tighten policy.

“The market is now speculating that a rate hike in March is possible when the Fed stops buying assets, so yields rise,” said Edison Pun, senior market analyst at Saxo Markets in Hong Kong.

He said he believed the declines in tech stocks would be short-lived, while the higher yields would help bank stocks.

Hong Kong-listed HSBC shares rose 2.3% on Wednesday, although Chinese bad debt manager Huarong (2799.HK) lost 40% when trading resumed after a suspension.

In forex markets, the yen was at 116.7 per dollar after falling to 116.34 overnight, its lowest since March 2017.

While the Bank of Japan is expected to be late, if not last in the queue to raise rates, the gap between US and Japanese yields widens, hurting the yen.

The euro was also down, the European Central Bank should also be slow to raise its rates. As a result, the dollar index which measures the greenback against six peers was at 96.272, the strongest part of its recent range.

Oil prices fell on Wednesday, abandoning some of the gains from the previous session. Brent crude futures fell 0.3%, to $ 79.73 per barrel after peaking at $ 80.26, while US West Texas Intermediate (WTI) crude futures lost 0.3% to $ 76.75 a barrel.

Spot gold was at $ 1,814 an ounce, stable on the day and at the high end of its recent range.

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Editing by Sam Holmes

Our Standards: Thomson Reuters Trust Principles.


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