Japan and South Korea fall greater than 3% with bond yields rising

SINGAPORE – Asia Pacific stocks fell sharply on Friday after falling on Wall Street overnight as a rapid surge in bond yields rocked investor sentiment.

In Japan, the Nikkei 225 fell 3.44% while the Topix index fell 2.71%. South Korea’s Kospi fell 3.32%.

Hong Kong’s Hang Seng Index fell 2.9% in afternoon trading. Mainland China stocks also fell: the Shanghai Composite was down 2.15% while the Shenzhen component was down 2.331%.

The Australian S & P / ASX 200 also posted significant losses as it fell 2.35%.

MSCI’s broadest index for stocks in the Asia-Pacific region outside of Japan fell 2.93%.

Bond yields are rising

Investors monitored bond yields during Friday’s session. Overnight, the yield on the 10-year US Treasury bill briefly crossed 1.6% to trade at its highest level in more than a year.

“Yields are rising because investors are bullish. They believe that a strong sustained recovery is imminent and prices will rise when demand picks up again,” wrote Kathy Lien, chief executive of FX strategy at BK Asset Management, in a note dated Thursday.

Investor optimism about the economic outlook has increased recently, driven by factors such as positive vaccine developments as several large economies vaccinate their populations.

Destination Wealth Management founder and CEO Michael Yoshikami said he was “not terribly surprised” that 10-year government bond yields hit 1.5% to 1.6%.

“I think if you start to get over two, two and a half, okay, then we’re starting to get worried. But honestly, I don’t see inflationary pressures in the economy right now, even if the stimulus package comes.” “Yoshikami told CNBC” Squawk Box Asia “on Friday.

US bond yields fell in the afternoon of Friday afternoon trading hours in Asia. The yield on the 10-year government bond was most recently 1.5029%, while the yield on the 30-year government bond was 2.2903%. The returns move inversely to the prices.

In the Asia-Pacific region, the yield on the Australian 10-year bond rose to 1.884%, while the yield on the 10-year Japanese government bond also rose to 0.171%. Previously, the return on the 10-year JGB had risen to 0.181% – a level that, according to FactSet, has not been reached since the beginning of 2016.

Tech stocks are falling

Investors also watched Asia Pacific technology stocks fall in trading on Friday.

Hong Kong-listed stocks of Chinese tech companies plummeted in afternoon trading: Tencent fell 3.11%, Xiaomi fell 5.03%, Alibaba fell 4.44% and Meituan fell 6.53%. The broader Hang Seng Tech Index in the city also fell more than 5%.

The Japanese conglomerate SoftBank Group posted a price decline of 3.7%. In South Korea, the shares of the industry heavyweight Samsung Electronics fell by 3.52%.

Those losses came after the tech-heavy Nasdaq Composite fell 3.52% overnight on Wall Street to close at 13,119.43 – its biggest sell-off since October 28.

The Dow Jones Industrial Average also fell 559.85 points to end its trading day at 31,402.01 while the S&P 500 fell 2.45% to close at 3,829.34.

Currencies and oil

The US dollar index, which tracks the greenback versus a basket of its peers, closed at 90.344 after a previous high of 90.383.

The Japanese yen was trading at 106.19 per dollar after weakening from below 105.6 against the greenback earlier this week. The Australian dollar changed hands at $ 0.7833, below the over $ 0.792 level it saw earlier in the week.

Oil prices were lower in the afternoon of Asian trading hours and the international benchmark Brent crude oil futures fell about 0.9% to $ 66.25 a barrel. The US crude oil futures fell 1.1% to $ 62.83 a barrel.

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