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Yield spike sours risk appetite

(ATF) Hong Kong: Asian markets were broadly lower as surging commodity and oil prices raised inflationary concerns which lifted US Treasury yields to one-year highs.

As commodity prices boomed, fuelled by a resurgent China, trading giant Glencore joined mining behemoth BHP in declaring a massive dividend payout.

Japan’s Nikkei 225 index slipped 0.58%, Australia’s S&P ASX 200 eased 0.46% but Hong Kong’s Hang Seng index advanced 1.1% ahead of the return of mainland China investors on Thursday from a week-long holiday break. Regionally, the MSCI Asia Pacific index declined 0.53%.

Benchmark 10-year US Treasury yields rose as far as 1.333% in Asia, the highest since February 2020, although they later eased back to 1.299%.

“Inflation expectations can act as a positive impulse for equities but are nearing levels where they became a headwind or at minimum cause investors to pause for a more in-depth look at all the reflationary headline noise,” Stephen Innes, Chief Global Market Strategist at Axi, said.

But analysts said the spike in yields did not indicate the possibility of central banks raising rates in the near term.

“Interestingly, this increase in rates can largely be attributed to a drop in term premium,” said DBS strategists in a note. “As clarity emerges for a recovery from a pandemic, there is no longer a need to demand that much premium in UST. Moreover, we reckon that 10Y breakeven of around 2.24% should have already priced in the reflation.”

Among commodities, US West Texas Intermediate (WTI) crude futures rose 41 cents, or 0.68%, to $60.46 and Brent crude futures gained 44 cents, or 0.69%, to $63.79 a barrel.

Copper prices hovered around 8 year highs. The red metal hit $8,437 per tonne, its highest since May 2012, having risen 8.8% year to date.

The dollar rose 0.3% to 90.8 versus a basket of currencies and that hurt gold prices with the precious metal easing 0.3% to $1,785 per ounce.

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Asia Stocks

· Japan’s Nikkei 225 index slipped 0.58%

· Australia’s S&P ASX 200 eased 0.46% 

· Hong Kong’s Hang Seng index advanced 1.10%

· The MSCI Asia Pacific index declined 0.53%.

Stock of the day

E-commerce retailer JD.com shares rose as much as 7.2% after it announced its plan to spin-off JD Logistics by way of a separate listing of the JD Logistics Shares on the Main Board of the Hong Kong Stock Exchange. “It is currently proposed that the Proposed Spin-off will be effected by way of the Global Offering of the JD Logistics Shares, comprising the Hong Kong Public Offering and the International Offering. Upon completion of the Proposed Spin-off, the Company will continue to indirectly hold more than 50% of the shareholdings in JD Logistics and therefore JD Logistics will remain as a subsidiary of the Company,” the company said.


Umesh Desai

Umesh Desai is the Executive Editor at Asia Financial. Prior to this he spent over two decades with Reuters News as Asia Pacific Chief Correspondent in Hong Kong and Bureau Chief in Bombay. Before becoming a journalist Umesh was a credit ratings analyst with Moody's arm in India - ICRA. A chartered accountant by training, Umesh began his career as an equity analyst. His Twitter handle is @umesh_desai


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