asia

GLOBAL MARKETS-Asia markets slide as higher bond yields test tech sector


* Tech, mining stocks lead broad Asia selloff

* MSCI AxJ index falls 1%; Hang Seng down 2.5%

* Powell vow for low rates drags on U.S. dollar

* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Tom Westbrook

SINGAPORE, Feb 24 (Reuters) – Falling tech stocks in Chinaand Hong Kong pulled Asia’s markets sharply lower on Wednesday,as recent gains in U.S. Treasury yields put lofty equityvaluations under pressure even as bond markets stabilised.

MSCI’s broadest index of Asia-Pacific shares outside Japanfell 1.8% and has lost 3.2% for the week so far.

Chinese blue chips fell 3% and the Hang Sengheaded for its sharpest daily fall in nine months with a3.4% drop that was further stoked by a rise in stock-tradingstamp duty.

Japan’s Nikkei fell 1% and mining shares draggedAustralia’s ASX 200 down by 0.9%. S&P 500 futuresdropped 0.6%, while EuroSTOXX 50 futures fell 0.2% andBritain’s FTSE futures fell 0.7%.

On Tuesday U.S. Federal Reserve Chairman Powell did not seemtoo peturbed by a selloff in Treasuries that has driven 10-yearyields up by 40 basis points this year, telling Congress it wasa statement on the market’s confidence in the pandemic recovery.

But he cautioned that the economy remained “a long way” fromemployment and inflation goals and said that rates would staylow and bond buying would proceed apace until there was”substantial further progress”.

“Powell has done enough to dampen the upswing in bondyields, but he has not derailed it,” said Vishnu Varathan, headof economics and strategy for Mizuho Bank in Singapore.

“Yields are consolidating and not retreating – and that’s aresult of this optimism that’s driving bond yields which hehasn’t pushed back against expressly.”

Ten-year Treasury yields fell about two basispoints after his remarks and more or less held there through theAsia session to trade at 1.340%. Wall Street indexes recoupedlosses but the tech heavy Nasdaq closed 0.5% lower.

VALUATIONS TESTED

Tech stocks are particularly sensitive to rising yieldsbecause their value rests heavily on earnings in the future,which are discounted more deeply when bond returns go up.

February’s rise in yields reflects not just higher inflationexpectations but better growth forecasts too, and ten-year U.S.real yields are on course for their sharpestmonthly rise in more than four years.

“In the next couple of days the movement of the Nasdaq 100will be pivotal, especially for China’s big tech sector,” saidCMC Markets’ analyst Kelvin Wong.

Nasdaq 100 futures were down 1% late in Asia trade.

In foreign exchange markets, commodity-linked currenciesforged ahead as prices of growth-sensitive raw materials fromcopper to crude oil traded around milestone highs.

The Australian and Canadian dollars hitthree-year peaks of $0.7945 and C$1.2560 respectively.

The New Zealand dollar also hit a three-year peakat $0.7384 after the central bank sounded upbeat on the economyeven as it signalled – like Powell – that rates would be stayinglow.

Copper hit a 9-1/2 year high in London and Shanghaiwhile benchmark Brent crude futures slipped0.4% to $65.10 a barrel after hitting a one-year high of $66.79on Tuesday. U.S. crude futures fell 0.8% to $61.17.

Later on Wednesday traders’ focus will turn to German GDPdata, further testimony from Powell as well as speeches from Fedmembers Richard Clarida and Lael Brainard.

Price moves in a handful of hot assets popular withspeculators – from bitcoin to Tesla and U.S.tech shares more broadly will also be closely watched as therise in bond yields tests their stretched valuations.

(Reporting by Tom Westbrook in Singapore. Additional reportingby Echo Wang in Miami; Editing by Lincoln Feast & SimonCameron-Moore)



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