Asian stocks fell sharply on Wednesday after a large drop on Wall Street as investors reacted to a surge in US government bond yields.
Tokyo’s Nikkei 225 fell 2.1% to 29,544.29 and Seoul’s Kospi fell 1.2% to 3,062.18. The Shanghai Composite Index lost 1.6% to 3,544.07. In Sydney, the S & P / ASX 200 lost 1.4% to 7,174.20.
Hong Kong’s Hang Seng Index reversed earlier losses, gaining 0.6% to 24,639.86 after struggling real estate developer Evergrande Group announced it was selling a stake in Shengjing Bank for $ 9.9 billion yuan ($ 1.5 billion) – a step towards solving its cash flow shortage.
Hong Kong-traded Evergrande shares jumped 10.9%.
In Japan, the choice by the ruling Liberal Democrats of former Foreign Minister Fumio Kishida to lead the party and thus become the next prime minister came after the markets had closed.
Kishida, 64, is considered an establishment figure, although he has called for measures to tackle growing inequalities in Japan, the world’s third-largest economy.
A rapid rise in Treasury yields is forcing investors to reassess whether prices have been too high for stocks, especially the more popular ones. On Tuesday, the 10-year Treasury yield jumped to 1.54%, its highest level since late June. This is up from 1.32% a week ago.
Early Wednesday it was stable at 1.53%.
“What we have here is the stock market finally looking vulnerable as Treasury yields rise, oil prices could easily hit $ 90 a barrel, and supply chain issues show no signs. sign of release, ”said Edward Moya of Oanda in a comment.
On Tuesday, the benchmark S&P 500 fell 2%, its worst drop since May, and the tech-rich Nasdaq fell 2.8%, its worst drop since March. Descenders outnumbered New York Stock Exchange advances 4 to 1.
The benchmark S&P 500 is down 3.8% since the start of the month and on pace with its first monthly loss since January after gaining nearly 16% since the start of 2021.
Bond yields started rising last week after the Federal Reserve sent the clearest signals yet that the central bank is moving closer to start pulling back the unprecedented support it has provided to the economy throughout throughout the pandemic. The Fed has indicated that it may start raising its benchmark interest rate over the next year and will likely start slashing the pace of its monthly bond purchases before the end of this year.
Higher yields mean Treasuries pay more interest, causing investors to pay less high prices for stocks and other things that are riskier bets than super-safe US government bonds. . The recent rate hike has hit tech stocks particularly hard, as their prices appear to be more expensive than the rest of the market, relative to their earnings.
The S&P 500 lost 90.48 points to 4,352.63. The Dow Jones Industrial Average lost 1.6% to 34,299.99.
Small business stocks also lost ground. The Russell 2000 Index fell 2.2% to 2,229.78.
Chipmaker Nvidia fell 4.4%, Apple slipped 2.4%, and Microsoft fell 3.6%. The wider tech sector is also grappling with a global shortage of chips and parts due to the virus pandemic. It could get worse as factories in parts of China are slowed down by power shortages.
Companies warn that supply chain issues and rising prices could hurt sales and profits. The Federal Reserve has maintained that the rise in inflation is temporary and linked to these supply chain disruptions as the economy recovers from the pandemic.
In other exchanges, US benchmark crude oil fell $ 1.29 to $ 74.00 per barrel in electronic trading on the New York Mercantile Exchange. It lost 16 cents to $ 75.29 a barrel on Tuesday.
Brent crude oil, the standard for international prices, fell $ 1.28 to $ 77.07 a barrel.
The US dollar slipped to 111.42 Japanese yen from 111.48 yen. The euro was little changed at $ 1.1682.