SYDNEY (Reuters) – Asian stock markets eased on Friday as rising global bond yields boosted sentiment toward technology stocks at rich prices, while massive crude oil positions caused the strongest setback in recent months.
After falling 7% overnight, futures on Brent crude fell 38 cents more to $ 62.90 a barrel, while U.S. crude threw 35 cents to $ 59.65. [O/R]
The withdrawal ended with four weeks of gains in a single session and could mark the end of a five-month run.
Shares were also baffled, as a pullback on Wall Street dropped the Japanese Nikkei by 0.7% and South Korea by 1%. MSCI’s broader Asia-Pacific stock index outside of Japan continued to fall by 0.5%.
Nasdaq futures rose 0.1%, after a sharp 3% overnight, while S&P 500 futures added 0.2%.
Markets are now ready for the outcome of a Bank of Japan policy meeting, where it is expected to loosen control over bond yields and reduce the purchase of ETFs, adjustments aimed at making the stimulus package more sustainable.
Investors continue to reflect on the U.S. Federal Reserve’s commitment to keep rates close to zero until 2024, even as it raises forecasts of economic growth and inflation.
Fed Chairman Jerome Powell looks set to take home the obscure message next week with no fewer than three appearances in a row.
“Stronger growth and higher inflation, but without rate hikes, is a powerful cocktail for risky assets and equity markets,” said Andrew Ticehurst, an economist at Nomura.
“The bond message is more mixed: while the short-term anchorage is positive, market participants may be concerned that the projected rise in inflation may not be temporary and that the Fed is risking to “cook it.”
U.S. ten-year bond yields peaked since early 2020, with 1.754% and 1.72%, respectively. If maintained, this would be the seventh consecutive week of increases worth 64 basis points in total.
The drastic bearish strengthening of the yield curve reflects the risk that the Fed considers serious in keeping rates low in the short term until inflation accelerates, so long-term bonds need to be forced to offer more serious returns to offset -the bear.
BofA’s latest investor survey showed that rising inflation and the “taper rage” of bonds had replaced COVID-19 as its number one risk.
While they are still very bullish in relation to economic growth, corporate earnings and equities, respondents feared a sharp reversal of equities if 10-year yields crossed 2%.
The jump in Treasury yields provided some support for the U.S. dollar, though analysts worry that faster U.S. economic growth will also widen the current account deficit to levels that will eventually drag the currency.
So far, the dollar index had bounced to 91,855, from a low of 91.30 to leave it a little firmer during the week.
It also raised the low-yield yen to 109.01, right next to the last ten months at 109.36. The euro fell back to $ 1.1914, after repeatedly failing to resist the $ 1.1990 / 1.2000.
Rising yields have weighed on gold, which offers no fixed yield, leaving it flat at $ 1,732 an ounce.
Additional reports by Elizabeth Dilts Marshall; Edited by Shri Navaratnam