SYDNEY (Reuters) – Asian stock markets slipped on Friday after a spike in global bond yields sent sentiment towards technical stocks at a rich price, while a stampede out of a crowded position could stop made the bull run in crude oil.
After falling 7% overnight, Brent crude futures ruled a fine kick of just 11 cents to $ 63.39 a barrel, while U.S. crude added 6 cents to $ 60.06. [O/R]
The retreat wiped out four weeks of wins in one session amid concerns that world demand would fall short of high eyes.
Markets were also rocked by the decision of the Bank of Japan (BOJ) to extend the target band for a 10-year yield and tweak asset purchases.
The bank described the changes as a “quick fix” to make discounts more sustainable, although investors seemed to be taking it as a step back from external stimulus.
A decision to limit purchases to just TOPIX-linked ETFs put the Nikkei down 1.6%, while South Korea lost 1%. Following MSCI’s broadest index of Asia-Pacific shares outside Japan with a fall of 1.5%.
Chinese blue chips peeled at 1.9%, possibly offset by a fiery exchange between Chinese and U.S. diplomats at the first personal speeches of the Biden era.
Nasdaq futures went flat, after a sharp 3% drop overnight, while S&P 500 futures added 0.1%. European futures followed the overnight fall with the EUROSTOXX 50 off 0.8% and FTSE futures 0.6%.
Investors are still reflecting on the U.S. Federal Reserve’s promise to keep rates near zero out until 2024 even as it raised predictions for economic growth and inflation.
Fed Chairman Jerome Powell appears to be driving home the dovish message next week with three fewer appearances lined up.
“Stronger growth and higher inflation but no increase in the rate of the cocktail is strong for risk funds and equity markets,” said Nomura economist Andrew Ticehurst.
“The message for bonds is more mixed: while short-term anchorage is positive, market participants may be concerned that the rise in inflation may not be temporary and that the Fed of “cooking it”.
Yields on 10-year U.S. pounds peaked since early 2020 at 1.754% and eventually peaked at 1.71%. If maintained, this would be the seventh straight week of a total value increase of 64 basis points.
The bearish leg reduction of the yield curve highlights the Fed’s serious risk of keeping short-term rates low until inflation accelerates, and therefore requires long-term bonds to offer fatter yields in order to compensation.
The latest BofA study of investors showed that inflation was rising and the “taper tantrum” link had replaced COVID-19 as the main threat.
While still highly bullish on economic growth, company earnings and stocks, respondents feared there would be a sharp halt in equities if 10-year yields exceeded 2%.
The jump in Treasury yields gave some support to the U.S. dollar, although analysts predict that faster U.S. economic growth will also widen the current account deficit to levels. which will eventually slow down the currency.
For now, the dollar index had kicked to 91.853, from a low of 91.30 to leave it a little firmer for the week.
It was stable on the yen with a low yield at 108.91, just off the recent 10-month high of 109.36. The euro moved back to $ 1.1914, after failing again against a crack at $ 1.1990 / 1.2000.
The rise in yield has weighed on gold, which does not offer a fixed yield, and left it down 0.2% at $ 1,731 an ounce.
Additional statement by Elizabeth Dilts Marshall; Edited by Shri Navaratnam and Lincoln Feast.