Asia-Pacific slip technology stock; 10 year US Treasury yield increase

SINGAPORE – Asia-Pacific technology stocks traded lower on Wednesday morning, reflecting losses among their peers on Wall Street after an overnight rise in U.S. 10-year Treasury yields.

Chinese technology stocks fell in Hong Kong, Alibaba fell 4.31% and Maituan 2.81%, and Tencent fell 2.15% in early trade on Wednesday. The Hang Seng Tech Index traded down 3.38%.

In Japan, shares of Softbank Group fell 3.18%. In South Korea, Kakao shares fell 2.33%, Naver fell 2.63% and SK Heinex fell 3%.

The losses in Asia came after the tech-heavy Nasdaq Composite retreated overnight on Wall Street, down 2.26% to 14,204.17.

Greater Asia-Pacific markets also traded in negative territory on Wednesday.

Hong Kong’s Hang Seng Index fell 1.74%. Mainland Chinese stocks fell as they returned to trade after a holiday earlier in the week. Shanghai Composite is down 0.65% while Shenzhen Component is down 0.847%.

We’re probably not at the Fed’s pick-up yet.

Frances Cheung and Terrence Wu

OCBC Treasury Research

Chinese service sector activity saw a sharp contraction in March, a private survey showed on Wednesday. The Caixin Services Purchasing Managers’ Index fell to 42.0 in March, a reading of 50.2 in February, as well as a 50 mark that separates growth from contraction on a monthly basis. Wednesday’s reading was also the lowest since February 2020.

The revelations come as China continues to fight its worst Kovid outbreak since the epidemic began in early 2020.

In Japan, the Nikkei 225 slipped 1.89% while the Topix index fell 1.37%. South Korea’s Kospi fell 0.64%.

Elsewhere, the S&P / ASX 200 fell 0.73% in Australia.

MSCI’s broader index of Asia-Pacific shares outside Japan traded 1.26% lower.

Investors will continue to monitor the move in US Treasurys on Wednesday. The 10-year Treasury reached its highest level since May 2019 on Tuesday, reaching a high of 2.562% before settling at 2.55%.

The benchmark 10-year Treasury note yield sits at 2.6161%, well above the 2.5853% yield of the 2-year Treasury note. The yield is moved inversely to the price.

A peak of 2-year Treasury yields against the 10-year rate, which occurred last week before the recent reversal, has historically been seen before the recession.

The 10-year Treasury yield jumped overnight after US Federal Reserve Governor Lel Brainard suggested an aggressive approach to shrinking the central bank’s balance sheet.

“Brainard has papered his comments on the balance sheet reduction with adverbs that add to the Hakish perception. Also, the decline may start earlier than expected in May, ”Frances Cheung and Terrence Wu of OCBC Treasury Research in Singapore wrote in a note.

“We’re probably not at the Fed’s pick-up yet. This dynamic can still expand, ”they said.

The US dollar index, which tracks the greenback against a basket of its peers, was at 99.608 after a recent jump from below 99.

The Japanese yen traded at 123.98 per dollar, weaker than the level below 123.3 against the greenback yesterday. The Australian dollar changed hands at $ 0.7571 after a recent drop above $ 0.762.

Oil prices were higher on the morning of the Asian trading hour, with the international benchmark Brent crude futures rising 0.18% to $ 106.83 a barrel. US crude futures were up slightly at 2 102.03 a barrel.

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