Most stocks in Asia dipped as equity valuations are challenged anew by the climb in benchmark 10-year Treasury yields to levels unseen since 2011, alongside fresh doubts over the rapprochement between the U.S. and North Korea.
Equities in Japan and Hong Kong followed their U.S. counterparts lower, though Australia’s main gauge eked out a gain and Korean stocks were little changed. FTSE 100 futures signaled a weaker U.K. open. Yields on 10-year Treasuries held near Tuesday’s high after traders boosted bets the Federal Reserve will raise interest rates three more times this year. Bloomberg’s dollar index steadied close to a 2018 high. In emerging-markets, equities maintained losses after dropping the most since March and currencies held onto declines after the biggest slide in a year.
Investors, already uncomfortable with rising yields and a strong dollar, are grappling with trade, growth, and geopolitical worries. Fresh uncertainty about the U.S.-North Korea summit, violence in the Middle East, the U.S.-China trade spat, and global growth concerns are fueling negative sentiment.
“Risk premiums are still awfully compressed,” Jeffrey Johnson, head of Asia-Pacific fixed income at Vanguard Investments Australia, said at the Bloomberg Invest summit in Sydney. “We look at valuations, particularly on more risky asset classes like equities — they are at fairly high levels still.”
Elsewhere, among emerging markets, the baht and won led Asian currencies lower after the surge in the 10-year Treasury yield. Indonesian bonds led a decline in sovereign debt ahead of a policy meeting, while the nation’s stocks had the biggest slide in Asia. The Malaysian ringgit fell for a sixth day after overseas investors pulled out a net $376 million from stocks over Monday and Tuesday in the wake of last week’s election. Gold steadied below $1,300 an ounce for the first time since December.
Terminal users can read more in our markets live blog.
These are some key events to watch this week:
- Chinese Vice Premier Liu He is expected in Washington for more trade talks.
- European Union Chief Brexit negotiator Michel Barnier briefs European affairs ministers on the status of talks with the U.K.
- U.K. Prime Minister Theresa May meets with her Brexit cabinet Tuesday to discuss plans for a post-withdrawal customs union.
- U.S. industrial production numbers are due this week.
These are the main moves in markets:
- The MSCI Asia Pacific Index fell 0.2 percent as of 3:30 p.m. Tokyo time.
- Topix index fell 0.3 percent.
- Hong Kong’s Hang Seng Index fell 0.4 percent.
- Kospi index was little changed.
- Australia’s S&P/ASX 200 Index advanced 0.2 percent.
- Futures on the S&P 500 Index were little changed.
- FTSE 100 futures fell 0.3 percent as of 7:15 a.m. in London.
- The Bloomberg Dollar Spot Index fell 0.1 percent.
- The Japanese yen was flat at 110.30 per dollar.
- The euro was little changed at $1.1826.
- The pound was at $1.3507.
- The yield on 10-year Treasuries was at 3.07 percent, after reaching 3.09 percent Tuesday.
- Australia’s 10-year yield rose more than five basis points to 2.88 percent.
- Germany’s 10-year bund yield fell about two basis points, to 0.63 percent.
- West Texas Intermediate crude fell 0.3 percent to $71.09 a barrel.
- Gold rose 0.3 percent to $1,294.01 an ounce.
- LME copper rose 0.2 percent to $6,822 per metric ton.
— With assistance by Ruth Carson