(Bloomberg) — Asian stocks and bonds fell Thursday, mirroring declines in the US, after another weak sale of Treasuries reinforced concerns about the impact of higher yields.
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Shares in Australia and South Korea dropped, while those in Japan declined over 1% at the open. Futures contracts for US equities also slipped in early Asian trading after the S&P 500 ended Wednesday back below 5,300, while the Nasdaq 100 had its worst day since May 1.
US Treasuries steadied after falling across the curve after tepid demand in the $44 billion sale of seven-year securities boosted concern that funding the US deficit will drive up yields at a time when the Federal Reserve is in no rush to cut rates. Australian and New Zealand debt tracked the moves early Thursday.
“Asian equity markets are set to start the day on the back foot following falls on Wall Street and as the deepening rout in global bond markets sap risk appetite,” said Tony Sycamore, market analyst at IG Australia in Sydney.
Rising Treasury yields have driven the dollar higher, in turn hitting the Japanese and Chinese currencies this week. A gauge of dollar strength steadied Thursday after jumping to a two-week high in its previous session.
The yen weakened as much as 0.3% to beyond 157.50 per dollar on Wednesday, where Japan’s government was suspected to have intervened to trigger a rapid rally in the currency in late trading. The onshore yuan fell to the lowest level since November as the People’s Bank of China let it decline against a resilient dollar through a weaker daily reference rate.
Emerging Asian currencies, including South Korea’s won and Malaysia’s ringgit, extended their weakness. Elsewhere, South Africa’s rand weakened 0.4% against the dollar Thursday as the country went to polls to elect its next parliament and government.
In commodities, oil was steady after retreating on Wednesday, with broader risk-off sentiment offsetting heightened tensions in the Middle East before an OPEC+ supply meeting on Sunday.
Higher Yields
Treasury 10-year yields climbed six basis points to 4.61% on Wednesday. European bonds also tumbled, sending yields to multi-month highs after inflation in Germany quickened more than expected, denting bets on a faster pace of rate cuts.
“Bond yields may be moving higher mainly due to supply of bonds and the continued massive deficit — and not because of a concern around inflation or strong economy,” said Eric Johnston at Cantor Fitzgerald.
The US economy expanded at a “slight or modest” pace across most regions since early April and consumers have pushed back against higher prices, the Fed said in its Beige Book survey of regional business contacts.
Meanwhile, Fed Chair Jerome Powell and his colleagues have stressed the need for more evidence that inflation is on a sustained path to their 2% goal before cutting the benchmark interest rate, which has been at a two-decade high since July.
In the corporate world, Salesforce Inc.’s shares slumped in extended trading after the software giant’s outlook for the current quarter missed estimates. HP Inc. reported revenue that topped estimates, including the first increase in PC sales in two years. Elsewhere, BHP Group abandoned its bid for Anglo American Plc.
Key events this week:
Eurozone economic confidence, unemployment, consumer confidence, Thursday
US initial jobless claims, GDP, Thursday
Fed’s John Williams and Lorie Logan speak, Thursday
Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday
China official manufacturing and non-manufacturing PMI, Friday
Eurozone CPI, Friday
US consumer income, spending, PCE deflator, Friday
Fed’s Raphael Bostic speak, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.3% as of 9:26 a.m. Tokyo time
Hang Seng futures fell 0.4%
Japan’s Topix fell 1.3%
Australia’s S&P/ASX 200 fell 0.7%
Euro Stoxx 50 futures fell 1.3%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0797
The Japanese yen rose 0.1% to 157.48 per dollar
The offshore yuan was little changed at 7.2721 per dollar
The Australian dollar was unchanged at $0.6610
Cryptocurrencies
Bitcoin rose 0.4% to $67,653.57
Ether rose 0.5% to $3,770.33
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Masaki Kondo and Stephen Kirkland.
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