SYDNEY (Reuters) – Asian stock markets slipped on Friday after a rise in global bond yields soured sentiment against cheap technology stocks, while a rush of tight positions could put an end to bull oil production in crude oil .
After dipping 7% overnight, Brent crude futures posted a weak bounce of just 11 cents to $ 63.39 a barrel, while U.S. crude added 6 cents to $ 60.06. [O/R]
The retreat eliminated four weeks of gains in a single session amid concerns that world demand would not fall short of expectations.
Markets were also uneasy about the decision of the Bank of Japan (BOJ) to broaden the target band slightly for yields for ten years and adjust the purchase of assets.
The bank has portrayed the changes as a ‘lithe’ way to make addiction more sustainable, although investors seem to be taking it as a step back from overall stimulus.
A decision to limit purchases to TOPIX-linked ETFs only dropped the Nikkei by 1.6%, while South Korea lost by 1%. MSCI’s broadest index of Asia-Pacific stocks outside Japan followed with a decline of 1.5%.
Chinese blue chips shook off 1.9%, perhaps unnerved by a heated exchange between Chinese and American diplomats during the first personal talks on the Biden era.
Nasdaq futures fell flat, following a sharp 3% drop overnight, while S&P 500 futures added 0.1%. European futures followed the overnight decline, with the EUROSTOXX 50 discount of 0.8% and FTSE futures 0.6%.
Investors are still reflecting on the US Federal Reserve’s promise to keep rates until 2024, even if it raises forecasts for economic growth and inflation.
Fed Chairman Jerome Powell is likely to drive home the devilish message next week with no fewer than three appearances.
“Stronger growth and higher inflation, but no interest rate hikes, is a powerful cocktail for risk assets and stock markets,” said Nomura economist Andrew Ticehurst.
“The message for bonds is more mixed: although the short of the short-term is positive, market participants may worry that the predicted rise in inflation will not be temporary and that the Fed may take the risk ‘too cooked’.”
Yields on U.S. 10-year notes rose the highest since early 2020 to 1.754% and last to 1.71%. If sustained, it will be the seventh consecutive week of increases worth a total of 64 basis points.
The drastic weakening of the yield rate reflects the risk that the Fed is serious about keeping short-term rates low until inflation accelerates, and therefore long-term effects should provide fatter yields to compensate.
The latest BofA survey among investors showed that rising inflation and the ‘taper tantrum’ of the bond replaced COVID-19 as their biggest risk.
Although economic growth, operating earnings and equities remained strong, respondents feared a sharp downturn in equities if ten-year returns exceeded 2%.
The rise in treasury yields has given the US dollar some support, although analysts fear that faster US economic growth will also increase the current account deficit to levels that will eventually affect the currency.
For now, the dollar index has risen to 91.853, from a low of 91.30 to make it slightly firmer for the week.
It rose on the low-yield rate to 108.91, just less than the recent ten-month high of 109.36. The euro fell back to $ 1.1914, after repeatedly failing to crack the resistance at $ 1.1990 / 1.2000.
The increase in yields weighs gold, which offers no fixed returns, leaving it 0.2% lower at $ 1,731 ounces.
Additional reporting by Elizabeth Dilts Marshall; Edited by Shri Navaratnam and Lincoln Feast.