Asian stocks slipped following a mixed Wall Street session as higher U.S. Treasury yields weighed on global tech firms. This pushed the dollar to a five-year high against Japan’s yen. U.S. yields rose as bond investors geared up for interest rate hikes from the Federal Reserve by mid-year to curb stubbornly high inflation. MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.8%. U.S. stock futures also slipped with S&P 500 e-minis down 0.25%. Nasdaq e-minis losing 0.4%.
Rob Carnell, head of Asia Pacific research at ING said that from Asia’s perspective, it is a slightly more risk-off tone. As it is one of those days where higher bond yields are a bad thing, as, even though they reflect a stronger U.S. backdrop. They tend to be supportive of the dollar rather than local currencies. Carnell stated that but it’s pretty choppy, and they might get back to thinking the higher yields reflect a stronger global backdrop. He said overnight declines in the Nasdaq due to the higher yields weighed on Asian share markets given the greater significance of tech stocks in the region.
Hong Kong-listed tech stocks lost 3.7% in early trade. Nintendo slipped 1%. Samsung shed 2% ahead of its quarterly results. U.S. shares were mixed with the tech-heavy Nasdaq losing 1.3%. This is though rising yields boosted banks and industrial names helped the Dow Jones Industrial Average to a record closing high. U.S. five-year notes, which reflect rate hike expectations, soared to their highest since February 2020. This is after U.S. two-year note yields hit their strongest level since March 2020. Benchmark U.S. 10-year treasury yields touched a six-week high and were last at 1.657%.
Minutes from the Fed’s December meeting, could underscore U.S. policymakers’ newfound sensitivity to inflation and their readiness to tighten policy. Edison Pun, senior market analyst at Saxo markets in Hong Kong said that the market is now speculating that a March rate hike is possible when the Fed stops purchasing assets, therefore yields are rising. He said that he thought declines in tech stocks would be short-lived, while rising yields would help banking stocks. HSBC’s Hong Kong-listed shares rose 2.3%.
With the Bank of Japan widely expected to be late if not last in the queue hike rates, the gap between U.S. and Japanese yields are rising. The euro was also on the back foot with the European Central Bank also likely to be slow to raise rates. As a result, the dollar index which measures the greenback against six peers was at 96.272. Oil prices drifted down, giving up some of the previous session’s gains. Brent crude futures fell 0.3%. West Texas Intermediate (WTI) crude futures lost 0.3%. Spot gold was at $1,814 an ounce.