Asian Stocks Down Over Rising U.S. Treasury Yields, Oil Rally

© Reuters.

By Gina Lee

AiVIF.com – Asia Pacific stocks were mostly down on Tuesday morning, with investors digesting soaring U.S. Treasury yields that weighed on U.S. counterparts, alongside an oil rally that triggered inflationary concerns.

Japan’s Nikkei 225 was down0.68% by 9:57 PM ET (1:57 AM GMT) and South Korea’s KOSPI fell 0.82%.

In Australia, the ASX 200 fell 0.87% while Hong Kong’s Hang Seng Index gained 0.60%.

China’s Shanghai Composite inched down 0.11% and the Shenzhen Component was down 0.26%. The manufacturing, non-manufacturing, and Caixin manufacturing purchasing managers indexes are due on Thursday.

The People’s Bank of China also pledged to safeguard the healthy development of the real estate market and protect home buyers’ rights amid China Evergrande Group's (HK:3333) ongoing debt crisis.

In the U.S., shares dipped as the benchmark 10-year U.S. yield briefly topped 1.5%, a level not seen since June 2021. The two-year yield rose to its highest since March 2020 as traders increasingly priced in the prospect of a sooner-than-expected asset tapering by the U.S. Federal Reserve.

“Central bankers have set out how they want to ‘normalize’ monetary policy for some time. That process could start soon. This realization has the potential to provoke some volatility in rates and equities,” AXA Investment Managers chief investment officer for core investments Chris Iggo said in a note.

Fed Chairman Jerome Powell will be joined by the Bank of England’s Andrew Bailey, the Bank of Japan’s Haruhiko Kuroda, and the European Central Bank (ECB)’s Christine Lagarde at an ECB Forum on Central Banking panel on Wednesday. Lagarde will speak at the forum a day before the panel.

He will also be joined by U.S. Treasury Secretary Janet Yellen to testify at a Senate Banking Committee hearing on Tuesday. The House Financial Services Committee hearing follows on Thursday.

Meanwhile, Senate Republicans blocked a bill to suspend the debt ceiling into December 2022 and keep the government operating past Sep. 30. Government funding will now run out Thursday if no further action is taken, with serious economic consequences.

In commodities, oil continued an upward trend as fears of a global energy crunch increase. Brent oil futures rose to their highest level in nearly three years, while WTI futures topped the $75 mark. Cryptocurrencies also clawed back their losses from the previous week’s volatility unleashed by China’s latest crackdown, with Bitcoin trading around the $43,000 mark.