Futures linked to the S&P 500 rose 0.2% in hectic trades. The index is on its way to its worst performance in a week in a month, having closed Thursday with a fall of almost 2% in the week. High-tech Nasdaq-100 contracts rose less than 0.2% on Friday, and the Dow Jones Industrial Average futures fluctuated between gains and losses.
ONE quick sale of US government bonds and technology stocks on Thursday took some investors by surprise. Yields on U.S. Treasury bills, considered one of the safest assets to own, have increased as money managers bet on a rapid economic recovery and direct more funds to riskier stocks and assets. But better bond returns have also led to the view that the valuations of technology stocks are very high.
In the long run, investors say the launch of Covid-19 vaccines and a new fiscal stimulus package from President Biden’s government will boost economic recovery.
“The fundamental image is robust. It may even be more robust compared to before ”the vaccine was launched, said
head of investment strategy for
exchange-traded funds and index investments for Europe, the Middle East and Africa. “Once income levels stabilize, risky assets can still perform well.”
Li said his group remains optimistic about the shares. Thursday’s liquidation on the broader stock markets may attract some investors to start buying again, she said.
In the bond markets, the 10-year Treasury yield fell to 1.475%, from 1.513% on Thursday, when it reached its highest closing level in a year.
The pace of the recent rise in bond yields, which rise when prices fall, has moderated investors’ appetite for technology stocks. Higher bond yields are also raising concerns that the Federal Reserve may raise interest rates earlier than investors expected, which could potentially increase borrowing costs and weigh on economic growth.
“What has happened in recent weeks is that markets have had to disapprove of expectations for Federal Reserve rate hikes,” said Dwyfor Evans, head of macro strategy for Asia Pacific at State Street Global Markets in Hong Kong.
He said the rise in bond yields would have an indirect effect in areas such as corporate loans and mortgage rates. “That’s why stocks will be under pressure here, because rising earnings will have some impact on the real [economy] and earnings may have to decrease, ”said Evans.
The ICE U.S. Dollar Index, which tracks the US dollar against a basket of currencies, was up 0.3%. Investors see the dollar as a safe asset and increase demand for it when the stock market falls.
Abroad, the Stoxx Europe 600 fell 0.4%. The technology sector index fell 1.1%.
In Asia, most of the major stock benchmarks ended the day in sharp decline. Japan’s Nikkei 225 index fell 4%, its biggest one-day drop since April. China CSI 300 Index, South Korea’s Kospi Composite and S&P / Australia
200 each fell more than 2%. The Hang Seng Index fell more than 3%.
“Considering that the market has already recovered in the past 10 months, you are seeing great profit making,” said Ken Wong, portfolio manager at Eastspring Investments. Wong said rising borrowing costs are leading some investors to undo long positions with debt, while expensive valuations are also fueling caution.
Some of the biggest declines occurred in high-tech stocks.
fell 3.3% while
both fell by more than 4.5%.
Some Asia-Pacific bond markets followed the U.S. sale on Thursday: Australian benchmark yields rose to 1.87%, the highest since 2019.
In Japan, 10-year yields have also risen in several years this week, albeit from a low base. They were at 0.15% late Friday afternoon in Tokyo. Since 2016, the Bank of Japan has maintained 10-year rates around zero under its policy of controlling the yield curve, although in recent years it has allowed rates to exceed or decrease by up to 0.2 percentage points.
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