SYDNEY (Reuters) – Asian stock markets fell on Friday after rising global bond yields eased sentiment toward technology stocks at rich prices, while a slump in crowded positions may have put an end to the oil race crude.
After falling 7% overnight, Brent crude futures hit a weak rebound of just 11 cents to $ 63.39 a barrel, while U.S. crude added 6 cents to 60.06 dollars. [O/R]
The withdrawal ended with four weeks of gains in a single session, amid concerns that global demand would fall short of high expectations.
Markets were also troubled by the Bank of Japan’s (BOJ) decision to slightly expand the target band for ten-year returns and adjust its asset purchase.
The bank portrayed the changes as an “agile” way to make relaxation more sustainable, even though investors seemed to do so as a step backwards from total stimulus.
The decision to limit purchases to TOPIX-linked ETFs only dropped the Nikkei by 1.6%, while South Korea lost 1%. MSCI’s broader Asia-Pacific stock index outside Japan continued to fall by 1.5%.
Chinese chips fell 1.9%, perhaps disturbed by an exchange of fire between Chinese and American diplomats in the first face-to-face conversations of the Biden era.
Nasdaq futures remained flat, after falling sharply by 3% overnight, while S&P 500 futures added 0.1%. European futures continued to fall overnight with EUROSTOXX 50 up 0.8% and FTSE up 0.6%.
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 1.71%, 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 91.853, from a low of 91.30 to leave it a little firmer during the week.
It remained in the low-yielding yen at 108.91, right next to the last ten months of 109.36. The euro fell back to $ 1.1914, after repeatedly failing to resist the $ 1.1990 / 1.2000.
The rise in yields has weighed on gold, which offers no fixed yield, leaving it down 0.2% to $ 1,731 an ounce.
Additional reports by Elizabeth Dilts Marshall; Edited by Shri Navaratnam and Lincoln Feast.