SYDNEY, RAW – Asian stocks have pulled back from record peaks as higher longer-dated bond yields and underwhelming US data dented investor confidence in a faster economic recovery from the COVID-19 pandemic, while gold hit a seven-month trough.
MSCI’s broadest index of Asia Pacific shares outside Japan was last down 0.1 per cent at 733.67 from a record high of 745.89 touched on Thursday.
The index is on track for a small weekly loss after two consecutive weeks of gains.
Since the start of the year, the index has surged nearly 10.5 per cent largely led by easy monetary and fiscal policies around the world.
On Friday, Australia’s benchmark S&P/ASX 200 index was down 0.8 per cent while Japan’s Nikkei fell 0.4 per cent.
Chinese shares started in the red with the blue-chip CSI300 off 0.6 per cent.
“The recent move up in longer dated core yields appears to be weighing on equity investors’ mind,” said Rodrigo Catril, forex strategist at National Australia Bank.
Core bond yields have pushed higher globally led by the so-called “reflation trade” where investors wager on a pick-up in growth and inflation. Successful coronavirus vaccine rollouts and hopes of massive fiscal spending under US President Joe Biden have spurred reflation trades.
Germany’s 10-year yield on Thursday posted its highest close since June, British 10-year yields traded at a 10-month top of 0.65 per cent and US Treasury yields are hovering near one-year highs about 1.3 per cent, a large factor supporting the US dollar.
Rising bond yields hurt the appeal of gold, with spot prices hitting a seven-month low of $US1,766 an ounce on Friday.
An unexpected increase in the number of Americans seeking jobless benefits hung heavy on outlook. The Labor Department reported initial unemployment claims rose by 13,000 to 861,000.
Further, US housing starts fell six per cent in January, the first decline in five months.
On Wall Street, the Dow fell 0.38 per cent, the S&P 500 lost 0.44 per cent, and the Nasdaq Composite 0.72 per cent.
In currencies, the dollar was steady with its index at 90.568.
The British pound hit its highest in more than three years at $US1.3965 led by the country’s successful vaccine rollout where 16.5 million people have already been inoculated. It is on track for a sixth straight weekly rise.
The euro is poised for a small weekly loss. The single currency was last at $US1.2085.
The risk-sensitive Australian dollar was on track for a third straight weekly rise, last trading at $US0.7762.
In commodities, oil markets saw some profit-taking following days of gains that were driven by a deep freeze across Texas that weighed on production.
Brent crude fell $US1.17 to settle at $US62.76 a barrel. US West Texas Intermediate (WTI) crude futures slipped $US1.37 to $US59.15 a barrel.