TOKYO (Reuters) – Rising concerns about rising US bond yields hit global equities on Thursday as investors waited to see whether Federal Reserve Chairman Jerome Powell would address concerns about the risk of a rapid rise in borrowing costs long term.
The spectrum of higher US bond yields also undermined low-yield assets and safe havens, such as the yen, the Swiss franc and gold.
Benchmark 10-year US Treasury rose to 1.477% as investors bet that US inflation could rise as an economic recovery picks up steam, driven by government incentives and further progress in vaccination programs.
“It’s not clear how the Fed wants to meet bond yields,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.
“The pace of yield growth has been much faster than most people expected, and there is speculation that the authorities may start thinking about tightening their policy.”
Shares of MSCI in Asia-Pacific Japan lost 1.7% at the beginning of trading, while Nikkei in Japan fell 1.9%.
E-mini S&P futures fell 0.4%, while futures for Nasdaq, the unequivocal leader of the post-pandemic rally, fell 0.6% to a two-month low.
Technical actions are vulnerable because their high valuation has been supported by long-term expectations of low interest rates.
Powell is due to speak at 12:05 pm EST (1705 GMT). Many Fed officials have downplayed Treasury yields in recent days, although Fed Governor Lael Brainard on Tuesday acknowledged concerns about the possibility of a rapid rise in yields that could slow economic activity.
The market will have to contend with a huge increase in debt sales after stimulus rounds to cope with a recession triggered by the pandemic.
The problem is not limited to the United States, with the 10-year yield of the British Gilts, which returned to 0.779%, close to the 11-month high of 0.836% recorded last week, after the government revealed much higher loans.
Foreign investors have continued to make dollars, while betting on an American economy that surpasses its peers in the developed world in the coming months. [USD/]
The dollar rose to a seven-month high of 107.16 yen.
“The US dollar / yen has been on a one-way trajectory since early 2021,” said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia.
“The bright outlook for the world economy is positive for both the US dollar / yen and the Australian dollar / yen.”
Other safe haven currencies were light, with the Swiss franc flirting with a minimum of four months against the dollar and a minimum value of 20 months against the euro.
Gold reached a nine-month low of $ 1,702.8 an ounce on Wednesday and last rose to $ 1,711.5.
Other major currencies were slightly moved, with the euro flat being $ 1.2054.
Investors’ focus on the US economic recovery was shaken by data released overnight showing that the US labor market was struggling in February, when private wages rose less than expected.
Oil prices rose for a second straight session on Thursday early as the possibility of OPEC + producers deciding against rising production at a key meeting later in the day was the basis for a drop in US fuel stocks. [O/R]
American crude rose 0.3% to $ 61.44 a barrel.
Koh Gui Qing’s additional reporting to New York; Edited by Sam Holmes and Richard Pullin