BANGKOK (AP) – Asian shares skidded yesterday, with Tokyo’s benchmark dropping four per cent after rising bond yields triggered a broad sell-off on Wall Street that handed the Nasdaq composite index its steepest one-day loss since October.
Tokyo, Hong Kong and Sydney all fell two per cent or more in early trading yesterday.
The tech-heavy Nasdaq shed 3.5 per cent on Thursday while the S&P 500 dropped 2.4 per cent, led lower by heavy selling in technology and communications companies.
The sell-off gained momentum when the yield on the 10-year United States (US) Treasury note moved above 1.5 per cent, a level not seen in more than a year and far above the 0.92 per cent it was trading at only two months ago. That move raised the alarm on Wall Street that yields, and the interest rates they influence, will move higher from here.
Early yesterday, the yield on the 10-year US Treasury note was 1.48 per cent.
US futures were lower, with the contract for the S&P 500 down 0.6 per cent and that for the Dow industrials off 0.7 per cent.
In Asia, Tokyo’s Nikkei 225 lost 1,202.2 points to 28,966.01, while the Hang Seng in Hong Kong sagged 2.4 per cent to 29,065.00.
The Shanghai Composite index shed 2.1 per cent to 3,509.08. South Korea’s Kospi declined 2.8 per cent to 3,012.95. The S&P/ASX 200 slipped 2.4 per cent to 6,673.30. India’s Sensex gave up 3.4 per cent to 49,320.98.
Bond yields have been rising this month, reflecting growing confidence among investors that the economy is on the path to recovery, but also expectations that inflation is headed higher, which might prompt central banks eventually to raise interest rates to cool price hikes. Rising yields can make stocks look less attractive relative to bonds to some investors, which is why every tick up in yields has corresponded with a tick down in stock prices.
In the past, such situations have triggered sell-offs in what has been called a “taper tantrum”, referring to a possible tapering off of monetary stimulus.
“This feels like a washout of ‘safe’ positions, and ultimately the market will continue to test the Fed’s resolve to keep a lid on rates. We’re in a precarious spot where any additional easing might be misinterpreted as the Fed losing faith in its own ability to control the market, which would be self-reinforcing,” Stephen Innes of Axi said in a commentary.
The S&P 500 index fell 96.09 points to 3,829.34. The Dow Jones Industrial Average lost 1.8 per cent, to 31,402.01. The Nasdaq slid 478.54 points to 13,119.43.