HONG KONG, RAW – Asian shares have lost ground, tracking declines on Wall Street as investors fretted over economic uncertainties that caused a spike in US benchmark bond yields and pushed the dollar to a more than 10-month high.
Doubts are re-emerging over the global recovery at a time when the US Federal Reserve is set to taper stimulus and the Biden Administration is stuck in contentious debt ceiling negotiations that could lead to a government shutdown.
Benchmark 10-year rates have gained 25 basis points in five sessions and were last at 1.5513 per cent, having hit their highest since mid-June the day before, while the dollar index was at 93.752.
Higher yields and the strong dollar hurt Asian equities in early trading on Wednesday. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.43 per cent with Australia off 1.5 per cent, and South Korea falling 2.06 per cent.
The Hong Kong benchmark shed 1.2 per cent and Chinese blue chips were 1.1 per cent lower.
Japan’s Nikkei shed 2.35 per cent hurt by the general mood as the country’s ruling party votes for a new leader who will almost certainly become the next prime minister ahead of a general election due in weeks.
Overnight, all three major US stock indices slid nearly two per cent or more, with interest rate-sensitive tech and tech-adjacent stocks worst hit by the surging yields.
It was the S&P 500 index’s biggest one-day percentage drop since May, and the Nasdaq’s largest since March, but US stock futures, the S&P 500 e-minis, were up 0.25 per cent in Asian hours.
Also on traders’ minds was cash-strapped China Evergrande Group, whose shares rose as much as 12 per cent after it said it plans to sell a 9.99 billion yuan ($US1.5 billion) stake it owns in Shengjing Bank Co Ltd.
Evergrande is due to make a $US47.5 million bond interest payment on its 9.5 per cent March 2024 dollar bond, having missed a similar payment last week, but it said in the stock exchange filing the proceeds of the sale should be used to settle its financial liabilities due to Shengjing Bank.
In currency markets, the strong dollar meant that the yen traded near its lowest since early 2020, while the euro hit a month low overnight.
Oil prices dropped having touched a near three-year high the day before. Brent crude fell 0.83 per cent to $US78.25 per barrel US crude dipped 1.09 per cent to $US74.47 a barrel.
Gold edged higher with the spot price at $US1,735.6 an ounce, up 0.1 per cent from the seven-week low hit the day before as higher yields hurt demand for the non interest bearing asset.