TOKYO (Reuters) – Resurgence of concerns about rising US bond yields hit global equities on Thursday, as investors waited to see if Federal Reserve President Jerome Powell would address concerns about the risk of a rapid increase in long-term borrowing costs.
The specter of higher US bond yields has also hurt low-yielding assets and safe havens, such as the yen, the Swiss franc and gold.
The 10-year benchmark US Treasury bills rose to 1.477%, with investors betting that US inflation may increase as the economic recovery gains momentum, driven by government stimulus and further progress in vaccination programs.
“It is not clear how the Fed wants to handle bond yields,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.
“The pace of rising incomes has been much faster than most people expected and there is speculation that the authorities may be starting to think about tightening their policy.”
MSCI’s former Asian Pacific Japan shares fell 1.7% in the first trades, while Japan Nikkei’s shares fell 1.9%.
E-mini S&P futures fell 0.4%, while Nasdaq futures, the unequivocal leader of the post-pandemic rally, fell 0.6%, to a two-month low.
Technology stocks are vulnerable because their high valuation was supported by expectations of a prolonged period of low interest rates.
Powell is expected to speak at 12:05 EST (1705 GMT). Many Fed officials have downplayed the increase in Treasury yields in the past few days, although Fed Governor Lael Brainard on Tuesday acknowledged concerns about the possibility that a rapid rise in earnings could hurt economic activity.
The market will have to deal with a huge increase in debt sales after rounds of stimulus to deal with a recession triggered by the pandemic.
The issue is not limited to the United States, with UK Gilts’ 10-year yield jumping back to 0.779%, close to its 11-month high of 0.836% reached last week after the government revealed much larger loans.
Currency investors continued to snap at dollars by betting on a US economy surpassing its peers in the developed world in the coming months. [USD/]
The dollar rose to a seven-month high of 107.16 yen.
“The dollar / yen has been on a unilateral path since the beginning of 2021,” said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia.
“The positive outlook for the world economy is positive for both the US dollar / yen and the Australian dollar / yen.”
Other safe-haven currencies were weak, with the Swiss franc flirting with a four-month low against the dollar and a 20-month low against the euro.
Gold hit a nine-month low of $ 1,702.8 per ounce on Wednesday and last time stood at $ 1,711.5.
Other major currencies were little moved, with the euro stable at $ 1.2054.
Investors’ focus on a US economic recovery was not shaken by data released overnight, which showed the US labor market struggling in February, when private payrolls increased less than expected.
Oil prices rose for the second consecutive session early on Thursday, as the possibility for OPEC + producers to decide against increasing production at an important meeting later in the day sustained the drop in US fuel stocks. [O/R]
US crude oil rose 0.3% to $ 61.44 a barrel.
Additional reporting by Koh Gui Qing in New York; Editing by Sam Holmes and Richard Pullin