Asian markets pull back on worries of inflation, interest-rate hikes

BANGKOK — Shares fell Wednesday in Asia as investors weighed the possibility that inflation might prompt central banks to adjust their ultra-low interest rate policies.

Hong Kong’s Hang Seng
HSI,
-2.91%
led the decline, losing 2%. Tokyo’s Nikkei 225
NIK,
-1.61%
shed 0.9% and in Seoul the Kospi
180721,
-2.45%
edged 0.9% lower. Australia’s S&P/ASX 200
XJO,
-0.90%
lost 1%, while the Shanghai Composite index
SHCOMP,
-1.99%
gave up 1.5%. Stocks gained in Singapore
STI,
+1.42%,
but slipped in Taiwan
Y9999,
-1.40%
and Indonesia
JAKIDX,
-0.40%.

Investors remain increasingly focused on a big tick up in bond yields and how it affects stock valuations.

The large amount of stimulus being pumped into economies has been a factor in pushing bond yields higher, giving some investors pause as it revives worries about inflation that have been nearly nonexistent for more than a decade.

The yield on the 10-year Treasury note, which has climbed recently, was steady at 1.34% on Wednesday.

When bond yields rise, stock prices tend to be negatively impacted because investors turn an increasingly larger portion of their money toward the steadier stream of income that bonds provide.

Federal Reserve Chair Jay Powell told Congress Tuesday the Fed didn’t see a need to alter its policy of keeping interest rates ultra-low, noting that the economic recovery “remains uneven and far from complete.”

The message seemed to be muted in Asia.

“Rising borrowing costs remain the prevalent issue on hand though Fed Powell’s dovish remarks had helped to arrest the fall for US equities on Tuesday,” Jingyi Pan of IG said in a commentary.

However, “Despite reassuring comments on lower rates from the U.S. Federal Reserve chair Jerome Powell, Asia markets continued to look to concerns with regards to the rising bond yields,” Pan said.

A late-afternoon burst of buying on Wall Street on Tuesday helped reverse most of a tech-focused sell-off, nudging the S&P 500
SPX,
+0.13%
to its first gain after a five-day losing streak.

The benchmark index eked out a 0.1% gain, to 3,881.37. The Dow Jones Industrial Average
DJIA,
+0.05%
also rose 0.1%, to 31,537.35. The Nasdaq
COMP,
-0.50%
lost 0.5% to 13,465.20. The indexes were at all-time highs less than two weeks ago.

In other trading, U.S. benchmark crude oil
CLJ21,
-0.39%
lost 52 cents to $61.15 per barrel in electronic trading on the New York Mercantile Exchange. It lost 3 cents on Tuesday to $61.67 per barrel. Brent crude
BRNJ21,
,
the international standard, lost 39 cents to $64.09 per barrel.

The U.S. dollar
USDJPY,
+0.28%
rose to 105.44 Japanese yen from 105.24 yen late Tuesday.

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