Global markets follow US declines

Global stocks fell after rising bond yields put pressure on tech stocks and pushed the S&P 500 to its worst pullback since May.

The prospect of the US Federal Reserve starting to cut or cut its bond purchases as early as November – and possibly raise interest rates next year – has combined with soaring prices for oil and others. commodities to drive up bond yields.

In turn, this tends to weigh on the stocks of fast-growing tech companies. These stocks are particularly sensitive to changes in interest rates, as evidenced by benchmark bond yields, as much of the value investors place on them is based on distant future earnings.

By early Wednesday afternoon in Tokyo, the Japanese Nikkei 225 index had fallen 2.6%, while the Kospi Composite in Seoul fell about 2%. The Australian S & P / ASX 200 lost 1.1%.

However, US equity futures rose slightly, suggesting that US markets may regain some ground in Wednesday’s trading. Futures contracts linked to the S&P 500, Nasdaq 100 and the Dow Jones Industrial Average rose about 0.5% to 0.6%.

In Hong Kong, the city’s flagship index, Hang Seng, fell 0.5% as Chinese tech stocks trailed their US peers. Industry heavyweight Tencent Holdings Ltd.

TCEHY -2.21%

lost 2.8%, while food delivery giant Meituan fell more than 3%.

Investors have questioned whether Asian tech stocks could maintain their current valuations, based on prices as multiples of earnings, amid faster inflation and rising interest rates, Zhikai Chen said, head of Asian equities for BNP Asset Management.

“For the rest of the year it will be difficult,” he said. Mr Chen said some Asian growth stocks could potentially fall 10% or more, although he is more optimistic about Chinese tech companies, which have already sold significantly due to a stock barrage. Chinese authorities.

More generally, Mr. Chen said that more expensive raw materials could also reduce the profits of some listed companies.

Actions in the Asia-Pacific region were likely to be rocked by a number of concerns, including questions about the Fed’s downsizing and actions taken by Chinese regulators, said Jim McCafferty, co-head of research. on regional actions at Nomura.

“In the short term, there is going to be a lot of volatility,” he said.

Actions in China Evergrande Group EGRNF 5.00%

gained 10% after the struggling real estate giant said it agreed to sell part of its stake in a regional Chinese bank for more than $ 1.5 billion.

Bond yields, which rise as prices fall, were little changed after the benchmark 10-year Treasury yield hit 1.534% on Tuesday, its highest level since June. During Wednesday afternoon trading in Hong Kong, the yield on 10-year Treasuries stood at 1.536%, according to Tradeweb.

Write to Frances Yoon at [email protected] and Quentin Webb at [email protected]

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