Asian stocks stumble as US yields and the dollar hold up

HONG KONG, Sept. 29 (Reuters) – Asian stocks lost ground on Wednesday, following declines on Wall Street as investors worried about economic uncertainties that caused US benchmark bond yields to surge and pushed the dollar at a high of more than 10 months.

Doubts reign over global recovery as the US Federal Reserve is set to cut stimulus and the Biden administration is stuck in controversial debt ceiling negotiations that could lead to government shutdown .

Benchmark 10-year rates gained 25 basis points in five sessions and were last at 1.5513%, after hitting their highest since mid-June the previous day, while the dollar index was at 93.752.

“We think 10-year Treasury yields should be around 1.5% to 1.75%, so they obviously still have room,” said Daniel Lam, senior cross-asset strategist at Standard Chartered.

Lam said the rise in yields was due to the fact that the United States would almost certainly start cutting back on its massive asset purchases by the end of this year, and that would cause a shift from growth stocks to values. valuable.

He said this change is unlikely to significantly reverse recent flows from Asian stocks to US stocks, as policy measures are generally less favorable in Asia than in the United States and Europe at present, he said. and therefore “the opportunities in Asia will be tactical and short term”.

Higher yields and the stronger dollar hurt Asian equities early in the session. The largest MSCI Asia-Pacific stock index outside of Japan (.MIAPJ0000PUS) fell 1.43%, Australia (.AXJO) 1.5% and South Korea (.KS11) fell 1.43% 2.06%.

The Hong Kong benchmark (.HSI) lost 1.2% and the Chinese blue chips (.CSI300) lost 1.1%.

Japan’s Nikkei (.N225) lost 2.35%, affected by the general mood as the country’s ruling party votes for a new leader who will almost certainly become the next prime minister ahead of general elections scheduled in a few weeks. Read more

Overnight, the three major US stock indices slipped nearly 2% or more, with interest rate-sensitive tech stocks and tech-adjacent stocks the most affected by the surge in yields.

It was the largest single-day percentage decline in the S&P 500 Index (.SPX) since May and the largest on the Nasdaq since March, but US equity futures, S&P e-minis 500, rose 0.25% in Asian hours.

Traders were also thinking of cash-strapped China Evergrande Group (3333.HK), whose shares rose 12% after announcing plans to sell a 9.99 billion yuan (1.5 billion yuan) stake. dollars) which he holds in Shengjing Bank Co Ltd (2066.HK).

Evergrande is due to make a bond interest payment of $ 47.5 million on its March 2024 9.5% dollar bond, after missing a similar payment last week, but he said in the stock file that the proceeds from the sale should be used to settle any financial debts owed. at Shengjing Bank. Read more

In currency markets, the strength of the dollar meant the yen was trading near its lowest since early 2020, while the euro hit its lowest month overnight.

Oil prices fell after hitting an almost three-year high the day before. Brent crude fell 0.83% to $ 78.25 per barrel US crude fell 1.09% to $ 74.47 per barrel.

Gold edged up with the spot price at $ 1,735.6 an ounce, up 0.1% from the seven-week low reached the previous day as higher yields dampened demand for the non-interest bearing asset.

Editing by Jacqueline Wong

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