By Associated Press
Asian shares slipped Friday after surging U.S. bond yields renewed pressure on high-flying technology companies.
Investors were disappointed with remarks by Federal Reserve Chair Jerome Powell on Thursday when he said inflation will likely pick up in the coming months, though he cautioned that the increase would be temporary and would not be enough for the Fed to alter low-interest rate policies set to help the economy recover from the pandemic.
Powell did not indicate the Fed might seek to rein in rising bond yields, which tend to draw money out of stocks into less risky bonds.
Investors were hoping for “a little more hand holding” from Powell, Stephen Innes of Axi said in a commentary. “Powell is doing the bare minimum here while simultaneously hinting at a lift-off level that could be a lot nearer on the horizon than suspected only a few weeks ago.”
That angst has spilled into world markets that have thrived on massive monetary stimulus from the world’s central banks.
Japan’s Nikkei 225 /zigman2/quotes/210597971/delayed JP:NIK -2.03% was last down 0.7% after initially falling as much as 2%, while the Hang Seng /zigman2/quotes/210598030/delayed HK:HSI -1.76% in Hong Kong trimmed steep early losses to be down 0.3%. South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -1.52% shed 0.4% while the S&P ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -0.29% sank 0.9%. Stocks inched higher in Singapore /zigman2/quotes/210597985/delayed SG:STI -1.16% , but fell in Taiwan /zigman2/quotes/210597977/delayed TW:Y9999 -0.70% and Indonesia /zigman2/quotes/210597981/delayed ID:JAKIDX -0.75% .
The Shanghai Composite index /zigman2/quotes/210598127/delayed CN:SHCOMP -0.0004% fell 0.3% as Chinese Premier Li Keqiang announced an annual growth target of “over 6%” at the opening of the annual session of the ceremonial national legislature. Investors are watching for any changes in policy direction from the National People’s Congress, in particular moves to rein in government spending or tighten monetary policy that might affect markets.
On Thursday, the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.60% fell 1.3% to 3,768.47, its third straight loss. It briefly dipped into the red for the year and is on track for its third consecutive weekly loss.
Just four days ago the benchmark notched its biggest gain since June during a brief pause in the recent, swift rise in bond yields, which in turn pushes up interest rates on loans for consumers and businesses.
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.63% lost 1.1% to 30,924.14. The Nasdaq composite /zigman2/quotes/210598365/realtime COMP +0.68% dropped 2.1%, to 12,723.47 in a pullback that knocked the tech-heavy index into the red for the year.
As the economy reopens this spring and summer, and vaccines are distributed and the coronavirus retreats, many economists expect a spending boom that will stretch available supplies of goods and services and likely push up prices, Powell said Thursday.
Even so, Powell gave no hint that the Fed would take steps to keep longer-term interest rates in check, such as by shifting some of its $80 billion in monthly Treasury purchases to longer-term securities.
“We think our current policy stance is appropriate,” he said.
The yield on the 10-year Treasury note jumped to 1.54% during Powell’s remarks, from 1.47% just before, a significant move. At the beginning of the year the yield was trading at 0.93%. Early Friday it was at 1.57%.
In energy trading, the price of U.S. crude oil rose 52 cents to $64.35 per barrel in electronic trading on the New York Mercantile Exchange. It jumped 4.2% on Thursday after OPEC members agreed to leave most of their existing oil production cuts in place.
The U.S. dollar /zigman2/quotes/210561789/realtime/sampled USDJPY +0.0194% was almost unchanged at 107.97 Japanese yen.