Bangkok: Shares rose Wednesday in Europe after sharp declines in Asia that tracked a broad slide on Wall Street on jitters over rising prices and surging US government bond yields.
A swift rise in Treasury yields is forcing investors to reassess whether prices have run too high for stocks, particularly the most popular ones.
On Tuesday, the yield on the 10-year Treasury jumped to 1.54 per cent, its highest level since late June. That’s up from 1.32 per cent a week ago.
Early Wednesday, it had fallen back to 1.5 per cent.
What we got here is stock market that finally looks vulnerable as Treasury yields surge, oil prices look like they could easily hit USD 90 a barrel, and as supply chain issues show no signs of easing, Edward Moya of Oanda said in a commentary.
Germany’s DAX picked up 0.7 per cent to 15,358.67 and the CAC 40 in Paris also added 0.7 per cent, to 6,551.59. Britain’s FTSE 100 gained 0.7 per cent to 7,079.21.
US futures also advanced, with the contract for the Dow industrials up 0.5 per cent, while the future for the S&P 500 was 0.6 per cent higher.
In Asian trading, Tokyo’s Nikkei 225 sank 2.1 per cent to 29,544.29 and the Kospi in Seoul dropped 1.2 per cent to 3,060.27.
The Shanghai Composite index shed 1.8 per cent to 3,536.29. In Sydney, the S&P/ASX 200 gave up 1.1 per cent to 7,196.70.
Hong Kong’s Hang Seng index reversed earlier losses, gaining 0.7 per cent to 24,663.50 after troubled property developer Evergrande Group said it was selling a stake in Shengjing Bank for 9.9 billion yuan (USD 1.5 billion) a step toward addressing its cash crunch.
Evergrande’s Hong Kong-traded shares jumped 15 per cent.
In Japan, the choice by the ruling Liberal Democrats of Former Foreign Minister Fumio Kishida to head the party and thus become the next prime minister came after markets had closed.
Kishida, 64, is seen as an establishment figure, though he has called for measures to address growing inequality in Japan, the world’s third largest economy.
On Tuesday, the benchmark S&P 500 index fell 2 per cent, its worst drop since May, and the tech-heavy Nasdaq fell 2.8 per cent, its worst drop since March. Decliners outnumbered advancers on the New York Stock Exchange 4 to 1.
The Dow Jones Industrial Average lost 1.6 per cent and the Russell 2000 index dropped 2.2 per cent.
The benchmark S&P 500 is down 3.8 per cent so far this month and on pace for its first monthly loss since January after it gained nearly 16 per cent since the beginning of 2021.
Bond yields started rising last week after the Federal Reserve sent the clearest signals yet that the central bank is moving closer to begin withdrawing the unprecedented support it has provided for the economy throughout the pandemic. The Fed indicated it may start raising its benchmark interest rate sometime next year and will likely begin cutting back the pace of its monthly bond purchases before the end of this year.
A rise in yields means Treasurys are paying more in interest, and that gives investors less incentive to pay high prices for stocks and other things that are riskier bets than super-safe US government bonds.
The recent upturn in rates has hit tech stocks particularly hard because their prices look more expensive than much of the rest of the market, relative to how much profit they’re making.
Companies are warning that supply chain problems and higher prices could crimp sales and profits.
The Federal Reserve has maintained that rising inflation is temporary and tied to those supply chain disruptions as the economy recovers from the pandemic.
In other trading, US benchmark crude oil gave up 58 cents to USD 74.71 per barrel in electronic trading on the New York Mercantile Exchange. It lost 16 cents to USD 75.29 per barrel on Tuesday.
Brent crude oil, the standard for international pricing, declined 60 cents to USD 77.75 per barrel.
The US dollar slipped to 111.30 Japanese yen from 111.48 yen. The euro fell to USD 1.1663 from USD 1.1683.