Asian stocks retreat second day as bond rout spreads to equities

[SINGAPORE] Asian stocks fell for a second day after a retreat in global equities as concern mounts over the selloff in bonds. Consumer companies led losses.

The MSCI Asia Pacific Index slid 0.1 per cent to 151.43 as of 9:01 am in Tokyo. While a successful auction of three-year debt helped arrest the slump in U.S. Treasuries, bonds from Europe to Japan were sold off Tuesday amid a rout that has erased more than US$450 billion in value from the global market. The Stoxx Europe 600 Index sank 1.3 per cent, while the Standard & Poor's 500 Index lost 0.3 per cent.

"Rising bond yields are making equities less attractive," Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which manages US$124 billion, said by phone. "Markets don't go up in a straight line and after a while they get vulnerable to a pullback and this is what's happening here. This is a correction and not the start of a bear market. We're still seeing fairly constrained global growth and central banks are still running very easy monetary policies."

Japan's Topix index lost 0.6 per cent. South Korea's Kospi index added 0.2 per cent. Australia's S&P/ASX 200 Index increased 0.1 per cent. New Zealand's NZX 50 Index gained 0.3 per cent. Markets in China and Hong Kong have yet to open.

China's Shanghai Composite Index climbed 1.6 per cent on Tuesday, bringing its three-day advance to 7 per cent, amid speculation lower borrowing costs will bolster domestic consumption.

The People's Bank of China trimmed interest rates over the weekend after recent economic data including exports and inflation showed weakening demand. The government will release data on industrial output and retail sales on Wednesday, with credit data also due this week.

E-mini futures on the S&P 500 rose 0.1 per cent today. The underlying measure pared a loss of as much as 0.9 per cent on Tuesday as yields on the 10-year Treasury note retreated from the highest level since November to decline three basis points to 2.25 per cent. An auction of three-year notes drew the strongest bidding since 2009.

BLOOMBERG