SYDNEY (Reuters) – Asian stock markets eased on Friday as rising global bond yields worsened sentiment on high-priced technology stocks, while a spike in crude oil positions caused the strongest retrograde in recent months.
After falling 7% overnight, Brent crude futures fell another 38 cents to $ 62.90 a barrel, while US crude dropped 35 cents to $ 59.65. [O/R]
Withdrawal eliminated four weeks of earnings in a single session and could mark the end of a five-month race.
Shares were also shaken as a retreat on Wall Street knocked down the Japanese Nikkei by 0.7% and South Korea by 1%. The largest MSCI index of Asia-Pacific equities outside Japan followed a 0.5% decline.
Nasdaq futures rose 0.1% after a sharp 3% drop overnight, while S&P 500 futures added 0.2%.
Markets are now preparing for the outcome of a Bank of Japan policy meeting, in which it is expected to weaken its control over bond yields and reduce the purchase of ETFs, changes aimed at improving the stimulus package.
Investors continue to reflect on the US Federal Reserve’s commitment to keep rates close to zero by 2024, even as it has raised its forecasts for growth and inflation.
Fed Chairman Jerome Powell appears to be leading the dovish message home next week with at least three appearances lined up.
“Stronger growth and higher inflation, but without rate hikes, is a strong cocktail for risky assets and stock markets,” said Nomura economist Andrew Ticehurst.
“The message for bonds is more mixed: while anchoring the short end is positive, market participants may worry that the forecast rise in inflation may not be temporary and that the Fed risks” cooking it too much. “
Yields on US banks for 10 years have increased to the highest since the beginning of 2020, at 1.754% and were at the last, by 1.72%. If supported, this would be the seventh consecutive week of increases of 64 basis points in total.
The drastic reduction in the yield curve reflects the risk that the Fed will keep short-term rates low until inflation accelerates, so that long-term bonds offer heavier returns to offset.
The most recent BofA survey conducted by investors showed that rising inflation and the “taper” of bonds have replaced COVID-19 as their first risk.
While still extremely strong in terms of growth, earnings and shares of the company, respondents feared a sharp return to equities if 10-year yields exceed 2%.
The jump in Treasury yields has provided some support for the US dollar, although analysts are concerned that faster US economic growth will also widen the current account deficit to levels that will eventually attract the currency.
For now, the dollar index has returned to 91.855, from a low of 91.30, to leave it a little firmer for the week.
It also rose to the low-yielding yen on 109.01, right next to the last 10.36-month high of 109.36. The euro fell to $ 1.1914, after repeatedly failing to break resistance at $ 1.1990 / 1.2000.
Rising yields weighed on gold, which does not provide a fixed return, and left it flat at $ 1,732 an ounce.
Additional reporting by Elizabeth Dilts Marshall; Edited by Shri Navaratnam