Asian Stock Market: Bears keep reins despite US-China yields spread shrinking to three-year low

  • Asian markets track their global counterparts as Treasury yields remain firmer ex-China.
  • PBOC’s readiness to defend the world’s second-largest economy keeps buyers hopeful.
  • Australia witnesses record virus-led deaths, New Zealand pushes back border reopening.
  • Tokyo and 12 other prefectures are up for quasi-emergency, geo-politics also play their roles.

Asian shares print losses, just like the rest, as market players brace for faster monetary policy normalization in the US during early Wednesday.

While portraying the mood, MSCI’s index of Asia-Pacific shares ex-Japan drops 0.30% whereas Japan’s Nikkei 225 declines 1.80% heading into the European session.

That said, 10-year Treasury yields of China government bonds dropped to the fresh low since June 2020, around 2.733% by the press time, after the People’s Bank of China (PBOC) official cited readiness to act.

“China's central bank will roll out more policy measures to stabilize the economy and move ahead of the market curve as downward pressure persists,” People’s Bank of China (PBOC) Vice Governor Liu Guoqiang said on Tuesday per Reuters. With this, the US-China 10-year bond coupon spread turns narrowest since 2019.

However, the same can’t defend Chinese equity bulls as markets in Beijing and Hong Kong stay negative, which in turn drown shares from South Korea, India, Indonesia.

It’s worth noting that Australian PM Scott Morrison’s failures to placate investors following the record virus-led deaths join hidden fears from New Zealand as the nation pushes back border reopening. Further, odds of quicker RBNZ rate hikes exert additional downside pressure on the NZX 50, down 1.75% daily at the latest.

On a broader front, the US 10-year Treasury yields rose 1.5 basis points (bps) to 1.88% after refreshing the two-year top to 1.89% during the early Asian session. Coupons of the other key US bond variants, like 2-year and 5-year, also renewed multi-day peaks during the early Asian session during the four-day uptrend before recently grinding higher. That said, S&P 500 Futures decline 0.43% intraday at the latest.

In addition to the yields and covid fears, escalating chatters concerning Russia-Ukraine and an Iraq-Turkey oil pipeline explosion also weigh on the market’s sentiment, which in turn drag equities and commodities. Though, the US dollar’s hesitance to track strong Treasury yields help Antipodeans to pare recent losses amid a sluggish session.

Moving on, US Treasury yields and other risk catalysts are crucial for markets while the US housing data and German inflation numbers may offer extra direction.

Read: S&P 500 falls under 4600 to hits fresh annual lows as Fed tightening fears, weak Goldman earnings weigh

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