Asian Stocks Down, Investors Wary as Treasury Yields Rise

This post was originally published on this site – Asia Pacific stocks were down Thursday morning, pressing pause on Wednesday’s gains and following in the footsteps of their U.S. counterparts. A rise in benchmark Treasury yields brought back investors’ memories of the previous week’s selloff in government bonds that caused yields to rise and share to tumble.

China’s Shanghai Composite fell 1.82% by 10:25 PM ET (3:25 AM GMT), while the Shenzhen Component dropped 2.71%. The National People’s Congress, where Premier Li Keqiang will deliver his 2021 work report, opens on Friday.

Hong Kong’s Hang Seng Index slid 2.80%.

Japan’s Nikkei 225 fell 1.78% and South Korea’s KOSPI was down 1.46%.

In Australia, the ASX 200 was down 1.10%.

Australian bonds dropped as benchmark Treasury yields hovered near a 1.5% gain during the previous session. The five-year breakeven rate, which measures market inflation expectations over the next five years, also hit its highest level since 2008.

The selloff rattled investors’ nerves globally amid rising concerns about excessive stock optimism. It remains to be seen whether policymakers will now step in to purchase longer-dated bonds, which they currently appear reluctant to do.

Investors are now turning to U.S. Federal Reserve Chairman Jerome Powell’s upcoming comments for guidance.

Chicago Fed President Charles Evans said on Wednesday he shared the view that the recent rise in yields was healthy ahead of Powell’s speech. But some investors did not share Evans’ view.

“Inflation is a concern; there is a lot of money sloshing around the system, and it makes sense to have some sort of a correction right now … and bond yields going up is the market’s implicit way of tightening since the Fed has made it clear they don’t have the intention of doing so,” Spotlight Asset Group chief investment officer Shana Sissel told Bloomberg.

U.S. data released on Wednesday also pointed to a slow and uneven economic recovery from COVID-19. The ISM non-manufacturing purchasing managers index (PMI) for February was 55.3, against the 58.7 figure in both forecasts prepared by and January. ISM non-manufacturing employment was 52.7 in February, down from January’s 55.2 reading.

However, the Fed’s Beige Book said that the U.S. economy expanded modestly in the first two months of the year and sentiment among business owners is picking up as COVID-19 vaccine rollouts boost the prospects for growth. Democrats are also drumming up support for a $1.9 trillion stimulus package, ahead of the bill coming up for debate in the Senate.

Further U.S. economic data will provide a further update on both the seed and direction of the economic recovery. U.S. factory orders, initial jobless claims and durable goods orders data will be released later in the day. February’s U.S. employment report, including non-farm payrolls, is due on Friday.

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