Asia: Stocks drop as treasury yields rise on Powell's response

[MELBOURNE] Asian stocks followed US peers lower after Federal Reserve Chairman Jerome Powell refrained from pushing back against the recent surge in bond yields. Treasuries held a decline.

Equities fell in Japan, South Korea and Australia after the S&P 500 erased nearly all its 2021 gains. The Nasdaq 100 extended losses to almost 10 per cent from February's high, and small caps fell roughly 3 per cent. S&P 500 and Nasdaq 100 futures both slipped.

Australian bond yields pushed higher, tracking a jump in the 10-year Treasury to 1.56 per cent that lifted the yield curve to its steepest point since 2015. The US dollar strengthened, pushing Japan's yen to an eight-month low.

Oil prices leapt after the Opec+ alliance surprised traders with its decision to keep output unchanged, signalling a tighter market in the months ahead. Bitcoin fell with other risk assets.

Mr Powell noted the recent runup in yields without hinting at intervention, saying that he would be "concerned by disorderly conditions". While some investors view the rates moves as a sign of economic strength, others are growing concerned about rising inflation and the impact of higher yields on elevated stock valuations.

"It makes logical and intuitive sense that Treasury yields should move back up to 1.5 per cent or 2 per cent, but we are concerned with the rest of the market about the speed at which it's getting there," said Mona Mahajan, investment strategist at Allianz Global Investors.

Meanwhile, the US Senate voted to take up a US$1.9 trillion relief bill backed by President Joe Biden, setting off a debate expected to end this weekend with approval of the nation's sixth stimulus since the pandemic-triggered lockdowns that began a year ago.

Elsewhere, China's annual National People's Congress gets under way, to review its 14th-five year plan and set long-term goals.

The February US employment report on Friday will provide an update on the speed and direction of the nation's labor market recovery.

These are some of the main moves in markets as of 9.32am in Tokyo: Stocks S&P 500 futures dropped 0.4 per cent. The gauge retreated 1.3 per cent on Thursday.

Japan's Topix index slid 1 per cent. South Korea's Kospi index fell 1.6 per cent. Australia's S&P/ASX 200 declined 1.3 per cent. Hang Seng futures earlier dropped 1.2 per cent.

CURRENCIES

The Bloomberg Dollar Spot Index rose less than 0.1 per cent. The euro dipped 0.1 per cent to US$1.1961. The Japanese yen added 0.1 per cent to 107.90 per US dollar.

BONDS

The yield on 10-year Treasuries rose about one basis points to 1.57 per cent. Australia's 10-year yield rose seven basis points to 1.85 per cent.

COMMODITIES

West Texas Intermediate crude jumped 0.4 per cent to US$64.07 a barrel.

Gold dropped 0.4 per cent to US$1,691.49 an ounce.

BLOOMBERG