Business News: After Wall St. bond yields rise, Equities decline in Asia.
Asian equities fell on Friday as rising US bond yields increased pressure on high-flying tech companies. Tokyo’s Nikkei 225 Index fell 2% and stocks in most other markets fell.
Investors were unhappy with the comments from Federal Reserve Chairman Jerome Powell on Thursday said inflation could rise in the coming months, despite the warning that the hike would be temporary and not enough for the Fed to change its low interest rate policy to help the economy to recover from the pandemic.
Powell did not suggest that the Fed would try to curb rising bond yields, which tend to draw money from equities into less risky bonds.
Investors expected “a little more hand” from Powell, Axi’s Stephen Innes said in a comment. Powell is doing the bare minimum here, while suggesting a takeoff that may be much closer than was suspected just a few weeks ago.
This distress spilled over into world markets which thrived on massive monetary stimulus from world central banks.
Japan’s Nikkei 225 lost 0.8% to 28,692.08 while Hong Kong’s Hang Seng lost 0.4% to 29,133.40. South Korea’s Kospi fell 0.6% to 3,024.40 while the S&P ASX 200 fell 0.9% to 6,699.00.
The Shanghai Composite Index fell 0.3% to 3,491.69 when Chinese Premier Li Keqiang announced an annual growth target of “over 6%” at the opening of the annual session of the national ceremonial legislature. Investors are watching for any changes in the direction of the policy from the National People’s Congress, in particular, moves to contain public spending or tighten monetary policy that could affect markets.
On Thursday, the S&P 500 fell 1.3% to 3,768.47, its third consecutive loss. He briefly slipped into the red for the year and is on track for his third consecutive weekly defeat.
Small business shares fell even more. The Russell 2000 Smaller Companies Index fell 2.8% to 2,146.92.
As the economy reopens this spring and summer, vaccines are being rolled out and the coronavirus retires, many economists are expecting a spending boom that will stretch supplies of available goods and services and likely drive prices up, Powell said Thursday. .
Even so, Powell did not hint that the Fed would take steps to keep longer-term interest rates in check, for example by shifting some of its $ 80 billion monthly Treasury purchases to longer-term securities.
“We believe our current political position is appropriate,” he said.
The 10-year Treasury note yield jumped 1.54% during Powell’s remarks, from 1.47% just before, a significant move. At the start of the year, the yield was trading at 0.93%. At the start of Friday it was at 1.57%.
Investors tend to revalue their holdings when yields rise rapidly. Technology stocks are more vulnerable after soaring during the pandemic, making them seem more expensive than the rest of the market. Bank stocks, on the other hand, tend to do better when bond yields rise because higher yields mean banks can charge higher rates on mortgages and other loans.