Shares in Europe rose on Wednesday after a sharp fall in Asia, which tracked a broader slide on rising Wall Street prices and rising US government bond yields.
The rapid rise in Treasury yields is forcing investors to reassess whether prices are too high for stocks, especially the most popular ones. On Tuesday, the yield on the 10-year Treasury rose to 1.54%, the highest level since the end of June. This is up from 1.32% a week ago.
It had fallen to 1.50% in the early hours of Wednesday.
Oanda’s Edward Moya said in a commentary, “What we found here is the stock market that ultimately looks weak due to rising Treasury yields, oil prices that could easily reach $90 a barrel, and supply chain issues.” I don’t show any signs of ease.” .
Germany’s DAX rose 0.7% to 15,358.67 and Paris’ CAC 40 also gained 0.7% to 6,551.59. Britain’s FTSE 100 rose 0.7% to 7,079.21.
US futures also advanced, with contracts for the Dow industrials up 0.5%, while the S&P 500 futures were up 0.6%.
In Asian trade, Tokyo’s Nikkei 225 fell 2.1% to 29,544.29 and Seoul’s Kospi fell 1.2% to 3,060.27. The Shanghai Composite Index ended 1.8% lower at 3,536.29. In Sydney, the S&P/ASX 200 closed down 1.1% at 7,196.70.
Hong Kong’s Hang Seng index reversed earlier losses, rising 0.7% to 24,663.50, after troubled property developer Evergrande Group said it was selling a 9.9 billion yuan ($1.5 billion) stake in Shengjing Bank – its A step towards addressing the cash crunch.
Hong Kong-traded shares of Evergrande jumped 15%.
In Japan, the choice of former Foreign Minister Fumio Kishida to lead the party and thus become the next prime minister by the ruling Liberal Democrats came after markets closed.
Kishida, 64, is seen as an establishment, though he has called for measures to address rising inequality in Japan, the world’s third-largest economy.
The benchmark S&P 500 index fell 2% on Tuesday, its worst drop since May, and the tech-heavy Nasdaq fell 2.8%, its worst decline since March. Disclaimers outweighed advances on the New York Stock Exchange 4 to 1.
The Dow Jones Industrial Average dropped 1.6% and the Russell 2000 Index dropped 2.2%.
The benchmark S&P 500 is down 3.8% so far this month and is on pace for its first monthly loss since January after rising nearly 16% since early 2021.
Bond yields began rising last week after the Federal Reserve sent clear signals that the central bank was moving closer to withdrawing the unprecedented support it has provided for the economy throughout the pandemic. The Fed indicated that it may begin raising its benchmark interest rate sometime next year and will likely begin reducing the pace of its monthly bond purchases before the end of this year.
The increase in yields means Treasuries are paying more in interest, and that gives investors less incentive to pay higher prices for stocks and other things that are riskier bets than super-secure U.S. government bonds. Huh. The recent jump in rates has hit tech stocks especially hard because their prices look more expensive than the rest of the market, regardless of how much profit they are making.
Companies are warning that supply chain problems and high prices could curtail sales and profits. The Federal Reserve has maintained that rising inflation is temporary and linked to those supply chain disruptions as the economy recovers from the pandemic.
In other trade, US benchmark crude oil traded 58 cents lower at $74.71 a barrel in electronic trading on the New York Mercantile Exchange. On Tuesday, it fell by 16 cents to $75.29 a barrel.
Brent crude, the standard for international pricing, fell 60 cents to $77.75 a barrel.
The US dollar fell from 111.48 yen to 111.30 Japanese yen. The euro fell from $1.1683 to $1.1663.