NEW YORK / SYDNEY (Reuters) – Asian stocks plunged to a month-long low on Friday, with US Treasury yields rising again shaking investors as they raised the dollar to a three-month high, which , in turn, dragged the Japanese yen.
Energy markets were also not spared volatility, with oil prices adding big gains overnight after the Organization of Petroleum Exporting Countries (OPEC) and its allies agreed to maintain their supply cuts in April, pending a stronger recovery in demand from the coronavirus pandemic. [O/R]
Australian shares fell more than 1%, Japan’s Nikkei shares fell 1.6% and Seoul shares fell 1.4%. Chinese stocks were in the red, with the CSI300 bluechip index falling 1.5%.
This sent the broadest MSCI index for Asia Pacific stocks outside Japan to 684.52, the lowest since February 1.
E-Mini S&P futures fell 0.5%.
US stocks fell on Thursday after Federal Reserve Chairman Jerome Powell disappointed some investors by not indicating that the Fed could increase long-term bond purchases to keep long-term interest rates low.
The high-tech Nasdaq Composite fell 2.1%, dropping it about 10% from its record close on February 12 and placing it in correction territory. [.N]
Even though Powell made it clear that the Fed was not close to changing its ultra-loose monetary policy stance anytime soon, some analysts still fear that increased Treasury yields could mean higher borrowing costs, thus limiting the fragile economic recovery from the USA.
“The market was apparently expecting Powell to resist more strongly in the recent rise in yields,” said Ray Attrill, head of foreign exchange strategy at the National Australia Bank.
“The volatility seen in the local interest rate markets yesterday, with another big increase in long-term rates and yields on government bonds, has created the scenario for an unstable market again today, if nightly developments serve as a guide.”
Bond investors with a pessimistic view of Treasury bills were encouraged by Powell’s comments and sold the notes. Yield on 10-year Treasury bonds rose above 1.5% to as high as 1.5727%, but still below the 1.614% year-on-year high achieved last week. [US/]
The yield curve, a measure of economic expectations, increased yields upward, with the difference between two- and 10-year yields increasing by another 6.3 basis points overnight.
The increase in Treasury yields has driven demand for the dollar. The dollar index jumped to a three-month high of 91.734. [USD/]
A stronger dollar hurt the yen. At the start of Friday, the yen fell to a low of 107.97, the lowest since July 1, although it reduced those losses and stayed at 107.85.
The euro was also hurt by a firmer dollar, with the common currency decelerating by $ 1.1960.
Rising yields and the strength of the dollar have shaken gold prices, which fell to the lowest drop in nine months, as investors sold the precious metal to reduce the opportunity cost of keeping the asset non-productive. [GOL/]
Spot gold fell an additional 0.2% on Friday to $ 1,692.26 an ounce, trading below $ 1,700 for the first time since June 2020.
Oil prices widened gains on Friday after rising more overnight.
US oil futures contracts rose 17 cents, or 0.3%, to $ 64, staying below the highest 13-month high on Thursday. Brent crude rose 10 cents to $ 66.84 a barrel.
In the cryptocurrency market, bitcoin fell 4% to $ 46,422 on Friday.
Reporting by Koh Gui Qing in New York and Swati Pandey in Sydney; Editing by Sam Holmes and Christian Schmollinger