Asian shares were mixed after a rough day on Wall Street, where US technology stocks tumbled in the face of rising inflation expectations.
South Korea’s tech-focused Kospi fell 0.5 per cent on Tuesday, Hong Kong’s Hang Seng rose 0.3 per cent and China’s CSI 300 index of Shanghai-and Shenzhen-listed stocks climbed 0.2 per cent. Japan’s market was closed for a national holiday.
The Chinese stock benchmark suffered its biggest drop in more than six months on Monday over concerns that the country’s rapid recovery from the pandemic could bring on quicker removal of support for asset prices.
On Wall Street on Monday, the S&P 500 shed 0.8 per cent, while the tech-centric Nasdaq Composite tumbled 2.5 per cent. Facebook, Amazon, Apple, Netflix and Google parent Alphabet all fell in what some investors suggested was the beginning of an overdue correction.
A sell-off in US government bonds, returns on which are undermined by inflation, picked up on Monday, with the 10-year US Treasury yield, which moves inversely to price, rose 0.03 percentage points, to 1.37 per cent. That helped undermine US equities, as low long-term interest rates boost the value of companies’ future cash flows.
With Japan on Holiday treasuries were not trading in Asia on Monday, delaying any further moves by yields until the European open.
Investors will also be scrutinising Fed chair Jay Powell’s testimony to Congressional committees on Wednesday for any hint on whether rising inflation could push the Federal Reserve to end ultra-loose monetary policy.
“The reality today is that inflation is a risk – core government bond yields are rising as markets reprice for better future growth”, said Kerry Craig, a global market strategist at JPMorgan Asset Management. “But some inflation may not be a bad thing, and the recovery has a long way to go before it becomes a problem.”
Oil prices continued to rise, with Brent crude, the global benchmark, up 1.5 per cent at $66.24 a barrel. US marker West Texas Intermediate rose 1.4 per cent to $62.59.