Shares across the Asia-Pacific region tumbled after stocks on Wall Street sold off in the face of rising US Treasury yields, which have been pushed higher by growing inflation expectations.
In afternoon trading in the region on Friday, China’s CSI 300 index of Shanghai and Shenzhen-listed stocks fell 3 per cent while Hong Kong’s Hang Seng dropped 2.2 per cent. South Korea’s Kospi index fell 0.9 per cent and Australia’s S&P/ASX 200 shed 0.6 per cent.
The falls in Asia came after Wall Street’s technology-focused Nasdaq Composite stock index tumbled 3 per cent on Thursday. The broader S&P 500 dropped 1.5 per cent, coming off a record-high closing level from Wednesday.
Those declines were spurred by increasing US Treasury yields, to which borrowing costs in many financial markets are benchmarked. Rising yields, which indicate falling demand for bonds, have forced investors to reprice the value of high-growth shares to reflect changes in interest-rate expectations.
On Thursday, the yield on the 10-year US Treasury rose to 1.75 per cent, crossing above 1.7 per cent for the first time since the market tumult of early 2020 sparked by the emergence of Covid-19.
The yield on the 10-year Treasury edged 0.03 percentage points lower in Asian trading on Friday to 1.698 per cent.
“This is spilling into wider markets,” said Robert Carnell, head of Asia-Pacific research at ING, of the sell-off in Treasuries, pointing to falls in prices for gold, oil and bitcoin.
In Japan, the benchmark Nikkei 225 fell 1.4 per cent while the Topix, another share index, gained 0.2 per cent. The moves came as the central bank scrapped its pledge to buy an average of ¥6tn ($55bn) a year in equities following its biggest policy review since 2016.
The divergence between the two indices followed the Bank of Japan’s announcement that it would concentrate its exchange-traded fund purchases solely on those that track the Topix. The Nikkei 225 was led lower by Fast Retailing, the parent of apparel chain Uniqlo, which has a large weighting in that index.
Stock futures for the S&P 500 were little changed during Asian trading on Friday.
Investors are also keeping an eye on the first high-level meeting between US and Chinese officials since US President Joe Biden took office, which began in Alaska with fiery exchanges between the two powers.
Oil prices continued to fall after tumbling on Thursday on concerns over flagging demand in China and the US. Brent crude, the international benchmark, dropped 1.1 per cent to $62.60 a barrel after dropping 7.6 per cent overnight. West Texas Intermediate was down 1.2 per cent to $59.31 a barrel after closing down 7.1 per cent on Thursday, marking the US benchmark’s biggest one-day fall in six months.
Additional reporting by Leo Lewis in Tokyo