SYDNEY (Reuters) – Asian stock markets fell on Friday after a spike in global bond yields soured sentiment about high-priced tech stocks, while a stampede of crowded positions may have ended the cash race. high crude oil.
After plummeting 7% overnight, Brent oil futures jumped just 11 cents to $ 63.39 a barrel, while US oil added 6 cents to $ 60.06. [O/R]
The pullback eliminated four weeks of gains in a single session amid fears that world demand would fall short of high expectations.
The markets were also uneasy about the Bank of Japan’s (BOJ) decision to slightly widen the target band to 10-year yields and adjust asset purchases.
The bank portrayed the changes as an “agile” way of making flexibilization more sustainable, although investors seem to be taking a step back from the total stimulus.
The decision to limit purchases to only TOPIX-linked ETFs brought the Nikkei down 1.6%, while South Korea lost 1%. The broader MSCI index for Asia Pacific stocks outside Japan fell by 1.5%.
Chinese blue chips fell 1.9%, perhaps bothered by a heated exchange between Chinese and American diplomats in the first face-to-face conversations of the Biden era.
Nasdaq futures were flat, after a sharp 3% drop overnight, while S&P 500 futures added 0.1%. European futures followed the decline overnight, with EUROSTOXX 50 falling 0.8% and FTSE futures 0.6%.
Investors are still reflecting on the US Federal Reserve’s pledge to keep rates close to zero until 2024, even as economic growth and inflation forecasts rise.
Fed Chairman Jerome Powell seems likely to deliver the dovish message next week, with no fewer than three appearances scheduled.
“Stronger growth and higher inflation, but without raising rates, is a potent cocktail for risky assets and stock markets,” said economist Andrew Ticehurst of Nomura.
“The message for the bonds is more confusing: although the anchoring of the short leg is positive, market participants may start to worry that the predicted increase in inflation is not temporary and that the Fed is at risk of overestimating it ”.
Yields on U.S. 10-year banknotes reached their highest peak since the beginning of 2020 at 1.754% and stood at 1.71%. If sustained, this would be the seventh consecutive week of increases in the value of a whopping 64 basis points in total.
The drastic downward slope of the yield curve reflects the risk that the Fed is serious about keeping short-term rates low until inflation accelerates, thus requiring long-term bonds to offer higher returns to compensate.
BofA’s latest investor survey showed that rising inflation and the bond “rabies crisis” replaced COVID-19 as its number one risk.
Although still very optimistic about the economic growth, profits and stocks of the companies, the interviewees feared a strong setback for the shares, if the 10-year yields exceeded 2%.
The jump in Treasury yields has provided some support for the US dollar, although analysts worry that faster US economic growth will also widen the current account deficit to levels that will ultimately drag the currency.
For now, the dollar index jumped to 91.853, from a low of 91.30, to make it a little firmer for the week.
It settled in the low-yielding yen at 108.91, just after the recent top of 109.36 in 10 months. The euro fell to $ 1.1914, having repeatedly failed to break the resistance at $ 1.1990 / 1.2000.
The rise in yields weighed on gold, which offers no fixed return, and left it with a 0.2% drop at $ 1,731 an ounce.
Additional reporting by Elizabeth Dilts Marshall; Editing by Shri Navaratnam and Lincoln Feast.