Asian shares on edge as US bond yields rise, oil volatile
HONG KONG : Share markets were jittery in early Asia on
Wednesday as trading was buffeted by a step-up in U.S. Treasury yields as well
as volatile oil prices in the face of price-cooling moves by the United States
and other nations.
MSCI's broadest index of Asia-Pacific shares outside Japan
slid 0.24 percent, while Japan's benchmark Nikkei stock price index fell
1.13 percent, as it returned from holiday and caught up with global falls the day
before .
Oil steadied a day after rising 3 percent to a one-week
high, even after the U.S. said it would release millions of barrels of oil from
strategic reserves in coordination with China, India, South Korea, Japan and
Britain to try and cool prices after repeated calls for more crude failed to
sway OPEC+ producers.
Brent crude futures reversed early losses to rise 0.15 percent to US$82.43 a barrel and U.S. crude futures rose 0.33 percent to US$78.76
a barrel.
"There's a lot going on at the moment," said
senior Asia economist Carlos Casanova at Swiss private bank UBP.
"10 year yields are rising, and the U.S. dollar is
strong, which is a little bit disruptive for Asian markets as a lot of the
currencies (apart from the Chinese yuan) will depreciate and there will be some
outflows on the back of widening real rate differentials."
However, "Chinese asset classes have been holding up
relatively well," he said, attributing the strength to the People's Bank
of China removing several hawkish references from Friday's quarterly monetary
policy support, indicating central bank support later this year or early next,
"which will provide a floor for equities."
Chinese blue chips were last flat 0.1 percent and are up
about 0.5 percent so far this week, versus a near 1 percent fall this week in
the Asian regional benchmark. Hong Kong shares lost 0.1 percent.
Overnight, yields on 10-year U.S. Treasury notes rose more
than 5 basis points to as high as 1.684 percent while yields on 30-year
Treasury bond gained 6 basis points. Two-year U.S. Treasury yields slipped
having touched their highest level since March 2020 on Monday.
"There's a risk that the Fed may speed up tapering (of
its bond-buying stimulus programme) and that in turn means the timetable for
tightening may be brought forward, contributing to the stronger dollar,"
said currency strategist Sim Moh Siong at Bank of Singapore.
Investors will be scrutinising the minutes of the U.S. Federal Reserve policy committee's November meeting to be published later in the global day for signs that the pace of tapering could accelerate.
Non-interest bearing gold which had reacted poorly to the
rise in Treasury yields, recovered a little. The spot price was last at
US$1,794 up 0.2 percent but still close to Tuesday's two-week low.
Major currencies are largely trading based on market
expectations of central banks' interest rate normalisation schedules.
New Zealand's central bank lifted interest rates for the
second time in as many months on Wednesday, driven by rising inflationary
pressure and as an easing of coronavirus restrictions supported economic
activity.
However, with markets having been open to the possibility of
a larger hike, the New Zealand dollar wobbled on the news before ending
marginally weaker at US$0.6928.
Next on the agenda in Asia is the Bank of Korea (BOK), which
has its policy meeting Thursday.
All but one of 30 economists in a Nov. 15-22 Reuters poll
predicted the BOK would raise its base interest rate by 25 basis points to
1.00 percent, with the dissenter anticipating a larger hike.
Otherwise, currency markets paused for breath on Wednesday
as the dollar largely held onto recent gains against most peers on the back of
rising Treasury yields.
However, the greenback did manage to edge up marginally to
hit a four-and-a-half-year top of 115.22 yen.
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