NEW YORK, March 4 (Reuters) – Asian stocks slipped on Friday as rising U.S. Treasury yields once again rocked equity investors while pushing the dollar to a three-month high, pushing its turn led the Japanese yen to an eight-month low.
Energy markets have not been immune to volatility either, with oil prices surging more than 5% overnight to their highest level in more than a year, after the OPEC and its allies agreed to keep production unchanged in April, with the recovery in demand following the coronavirus pandemic still fragile.
At the start of Friday, Australian stocks fell 1%, Japan’s Nikkei stock average fell 0.7%, Seoul stocks fell 0.24%, and E-Mini S&P futures fell slightly at 0.04%.
US stocks fell sharply on Thursday after Federal Reserve Chairman Jerome Powell disappointed some investors by failing to indicate that the Fed may step up its long-term bond purchases to contain long-term interest rates term.
The high-tech Nasdaq Composite fell 2.1%, pulling it down about 10% from its closing high on February 12 and placing it in correction territory.
Even though Powell made it clear that the Fed was not close to changing its ultra-loose monetary policy anytime soon, some analysts were still concerned that the rise in Treasury yields could herald higher borrowing costs, thus limiting the fragile US economic recovery.
“The US dollar gained 0.8%, and there you see the holy trinity of market fears – rising real rates, heightened expectations for rate hikes and a stronger US dollar,” said Chris Weston, head of research. at Pepperstone Markets Ltd, a currency broker, in Australia.
Bond investors with a bearish view of Treasuries took confidence in Powell’s remarks and sold the notes. The yield on 10-year Treasuries climbed above 1.5% to 1.5727%, but still below a one-year high of 1.614% reached last week.
The yield curve, a measure of economic expectations, steepened as yields rose, with the spread between two-year and 10-year yields widening an additional 6.3 basis points overnight.
Rising Treasury yields supported dollar demand. The dollar index jumped 0.61% against a basket of major currencies to 91.651, in view of a three-month high of 91.663.
A stronger dollar hampered the yen. On Friday morning, the yen was soft at 107.95, a level not seen since July 1.
The euro was also triggered by a stronger dollar, with the common currency sluggish at $ 1.19665.
Rising yields and the strength of the dollar pushed gold prices down, which fell to a nine-month low as investors sold the precious metal to lower the opportunity cost of holding the asset. unproductive.
Spot gold slipped 0.2% earlier Friday to settle at $ 1,694.0600 an ounce, trading below $ 1,700 for the first time since June 2020.
Oil prices, on the other hand, extended their gains early Friday after rising overnight.
U.S. crude futures soared 0.85% to $ 64.38 a barrel, after hitting their January 2020 high of $ 64.86 overnight. Analysts said OPEC’s decision not to increase production in April, as many had expected, showed what it is prepared to do to deplete excess inventory and keep prices high.
In the cryptocurrency market, bitcoin reduced losses overnight and fell 3.8% to $ 48,473 early Friday.
(Reporting by Koh Gui Qing; Editing by Sam Holmes)