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James Hyerczyk
Asia Pacific Shares

The major Asia-Pacific stock indexes dropped sharply and regional bond yields rose on Friday after U.S. Treasury yields jumped, as prospects for higher inflation and economic growth increased, making investors doubt that central banks would retain ultra-low interest rates for a longer period.

Cash Market Performance

In the cash market on Friday, Japan’s Nikkei 225 Index settled at 28966.01, down 1202.26 or -3.99%. Hong Kong’s Hang Seng index finished at 28980.21, down 1093.96 or -3.64% and South Korea’s KOSPI Index closed at 3012.95, down 86.74 or -2.80%.

In China, the Shanghai Index settled at 3509.08, down 75.97 or -2.12%. In Australia, the S&P/ASX 200 Index finished at 6673.30, down 160.70 or -2.35%.

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Tracking Global Bond Yields

Investors continued to track bond yields during Friday’s session. Overnight, the yield on the benchmark 10-year U.S. Treasury note briefly crossed the 1.6% level to trade at its highest level in more than a year.

U.S. bond yields eased in the afternoon of Asia trading hours on Friday. The yield on the 10-year was last at 1.4719%, while the yield on the 30-year Treasury bond sat at 2.2636%.

In Asia-Pacific, the yield on the Australian 10-year bond slipped to 1.834% after touching a high of 1.973% earlier. The 10-year Japanese government bond’s yield also declined to 0.156%. Earlier, the yield on the 10-year JGB had risen as high as 0.181% – a level not seen since early 2016, according to FactSet.

Japan Stocks Crumble as Bond Market Rout Wreaks Havoc

Japanese shares slumped on Friday, logging their biggest daily decline in nearly a year, after a spike in global bond yields spooked investors already uneasy about the market’s stretched valuation.

All of the Tokyo Stock Exchange’s 33 industry subindexes were in the red, with electronic machinery makers, pharmaceuticals and real estate companies falling more than 3%.

Semiconductor-related shares, one of the main leaders of the market’s rally to 30-year highs, succumbed to heavy selling, after U.S. chip shares fell 5.8%.

South Korean Shares Post Worst Weekly Fall in 1-Month on Foreign Selloff, US Tech, Bond Rout

South Korean shares reversed most gains clocked in the previous session on Friday, dragged down by a record foreign selloff, following a sharp overnight fall in Wall Street tech shares and a spike in Treasury bond yields.

For the week, it tumbled 3.05%, its sharpest decline in four weeks, while it gained 1.23% on a monthly basis, extending gains to a fourth straight month.

China, Hong Kong Stocks Drop Over 2% as Bond Yields Surge

China and Hong Kong stocks fell sharply on Friday, in line with broader markets, as a rout in global bonds sent yields flying and dampened appetite for risky assets.

Fears over policy tightening and lofty valuations had already pummeled China’s benchmark CSI300 index, which was down nearly 10% from its record high hit earlier in the month, mainly due to heavy selling in high-flying sectors such as consumer, healthcare and new energy firms.

For a look at all of today’s economic events, check out our economic calendar.

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