Asian stocks falter and expected to suffer monthly loss in case of bond rout

SYDNEY (Reuters) – Asian stocks were on the back Wednesday as the safe-haven dollar held close to a year-long high as Treasury yields resumed rising, hitting sentiment even as the data China supported the signs of a strong global economic recovery.

The lead for Europe was also weaker, with futures contracts on eurostoxx 50, German Dax and London FTSE each at 0.2%. E-mini futures for the S&P 500 have hardly changed.

The largest MSCI index of Asia-Pacific stocks outside of Japan fell from a one-week high of 682.36 points to 678.22 to move away from a historic high of 745, 89 hit last month.

For the month so far, the index is down 2.2% to be on track for its first loss in five months. It is set to make its fourth consecutive quarterly gain, despite being the smallest increase since a 21% drop in March 2020 when the coronavirus pandemic brought the world to a standstill.

“Markets are watching closely to assess the damage and potential spillover effects caused by the Archegos Capital Management crisis,” ANZ analysts wrote in a note.

Some global banks face billions of dollars in losses after US investment firm Archegos Capital Management LP defaults on margin calls, putting investors in trouble over who else might be exposed .

“For some, this serves as a timely reminder that while pandemic risks decrease, risks in financial markets remain high,” ANZ added.

The risk mood of late has been sparked by a surge in bond yields. U.S. Treasuries yields soared 83 basis points just this quarter, the biggest increase in more than a decade, making stock valuations look high, especially for big tech companies. who suffered the brunt of the sale.

10-year Treasuries yields hit 1.746% on Wednesday from 1.708% on Tuesday.

Blackrock analysts said they still love tech stocks.

“Technology is a diverse industry and the driver of higher returns matters more than the hike itself,” Blackrock said in a note to clients.

“Our new nominal theme implies that central banks will be slower to raise rates to curb inflation than in the past, supporting our pro-risk stance and preference for technology.”

Over a 6 to 12 month period, Blackrock is “overweighting” stocks and “underweighting” US Treasuries, expecting a nominal increase in yields.

“The ‘term premium’ crisis primarily reflects investors demanding higher compensation for the now greater risks to portfolios presented by government bonds and inflation, in our view,” Blackrock said.

“This makes stocks even more attractive than bonds in a multi-asset context – and suggests that any further sell-off in the tech sector could present opportunities.”

Sentiment in Asia remained pessimistic despite data showing that Chinese industrial activity grew at a faster rate than expected in March, while the country’s service sector also rose.

Chinese stocks started in the red and deepened their losses, with a blue chip index at 0.9%. Hong Kong’s Hang Seng Index fell 0.4%.

Japan’s Nikkei slipped 0.9% as the country’s industrial production fell in February on lower production of cars and electric machinery.

Australia’s core index resisted the upward trend of 0.8% while New Zealand advanced 0.9%.

In forex markets, currencies were mainly a sea of ​​red against the US dollar which hit a year-long high of 110.48 against the yen, with investors betting massive fiscal stimulus and aggressive vaccinations will boost. the US economic recovery. [FRX/]

The dollar is on track for a third consecutive monthly rise against the yen and its strongest since late 2016.

The dollar index held steady above 93 after hitting a high of 93.357 on Tuesday. It went from nearly 90 in early March, on track for its best month since 2016.

In commodities, Brent rose 64 cents to $ 64.78 per barrel while US crude added 57 cents to $ 61.12 per barrel.

Gold prices edged up to 1,686.2 an ounce.