NEW YORK / SYDNEY (Reuters) – Asian stocks swayed to a month-long low on Friday as rising yields on U.S. Treasuries confused equity investors again as the dollar hiked to a three-month high, adding to in turn, the Japanese yen dragged.
Energy markets were also not spared volatility, with oil prices contributing to big gains overnight after the Organization of Petroleum Exporting Countries (OPEC) and its allies agreed to largely enforce their supply constraints in April pending of a firmer recovery in corona pandemic demand. [O/R]
Australian stocks lost more than 1%, Japan’s Nikkei stock fell 1.6% on average, and Seoul stocks fell 1.4%. Chinese stocks were in the red with the bluechip CSI300 index of 1.5%.
That sent MSCI’s widest index of Asia-Pacific stocks outside Japan to 684.52, the lowest since February 1.
E-Mini S&P futures were down 0.5%.
US stocks fell on Thursday after Federal Reserve Chairman Jerome Powell disappointed some investors by not saying the Fed could step up purchases of long-term bonds to keep longer interest rates low.
The tech-heavy Nasdaq Composite plummeted 2.1%, dropping about 10% from its Feb. 12 record and putting it in correction territory. [.N]
While Powell made it clear that the Fed would not change its ultra-loose monetary policy stance any time soon, some analysts were still concerned that rising government bond yields would usher in higher borrowing costs, thus limiting the fragile US economic recovery.
“The market was apparently looking for Powell to push back the recent rise in yields harder,” said Ray Attrill, head of forex strategy at National Australia Bank.
“The volatility seen yesterday in local interest markets with another large rise in long-term and government bond yields set the tone for a turbulent market today if short-lived developments are a guide.”
Bond investors with a bearish view of government bonds took Powell’s comments to heart and sold the bonds. The yield on 10-year government bonds climbed above 1.5% to even 1.5727%, but remained below the one-year high of 1.614% last week. [US/]
The yield curve, a measure of economic expectations, steeped as interest rates rose, widening the difference between two- and ten-year rates overnight by 6.3 basis points.
Rising government bond yields boosted demand for the dollar. The dollar index jumped to a three-month high of 91,734. [USD/]
A stronger dollar bumped the yen. At the start of Friday, the yen fell as low as 107.97, its low since July 1, although it made up for those losses and was last at 107.85.
The euro was also toppled by a firmer dollar, with the common currency sluggish at $ 1.1960.
Rising yields and the strength of the dollar put pressure on the gold price, which fell to a nine-month low as investors sold the precious metal to lower the opportunity cost of holding the non-performing asset. [GOL/]
Spot gold fell an additional 0.2% to $ 1,692.26 an ounce early Friday, trading below $ 1,700 for the first time since June 2020.
Oil prices rose early Friday after a higher overnight flight.
US crude oil futures climbed 17 cents, or 0.3%, to $ 64, while staying below its 13-month high on Thursday. Brent crude oil rose 10 cents to $ 66.84 a barrel.
In the cryptocurrency market, bitcoin fell 4% at $ 46,422 on Friday.
Reporting by Koh Gui Qing in New York and Swati Pandey in Sydney; Editing by Sam Holmes and Christian Schmollinger