Asia’s equities opened lower Wednesday after the US stock market had its worst day since May and bond yields rose on inflation fears. Treasuries contributed to the drop.
Equities dipped in Japan, Australia, and South Korea as investor anxiety grew over Washington’s debt-ceiling impasse. US futures jumped as the S&P 500 fell 2%, the biggest since May. As Treasury yields increased, technology stocks performed worse than economically sensitive stocks. The Nasdaq 100 fell to its lowest level since March.
The yield on the 10-year Treasury note increased somewhat. Earlier this week, the yield on the 30-year note increased by about ten basis points. WTI crude oil prices have dipped below $74 per barrel. Brent crude oil prices have retreated from three-year highs around $80 a barrel. Gold remained stable following a decline. The dollar gained strength.
Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen both warned during a Senate hearing that a US default as a result of failure to raise the debt ceiling would have disastrous effects. Republicans blocked a Democratic effort to raise the debt ceiling in the Senate.
Markets were also pulled down by Senator Elizabeth Warren’s vehement remarks. After criticising Powell’s record on financial regulation, Warren stated that he is a “hazardous man to lead the Fed” and that she will vote against his renomination.
The Washington dispute is the latest obstacle for investors already struggling from rising energy costs at a time when central banks are about to withdraw some of the economic support. Consumer confidence in the United States fell for the third consecutive month in September, indicating that fears about the economic variation and rising prices continue to weigh mood.
“What we have here is a stock market that is beginning to look vulnerable as Treasury yields rise, oil prices look like they may easily reach $90 per barrel, and supply chain difficulties show no indication of abating,” said Edward Moya, senior market analyst at OANDA. “There is a lot of drama on Wall Street right now, and the most of it is related to a reset of inflation expectations.”
Read: Market Volatility Increases as the S&P 500 Drops to a Two-Month Low
Meanwhile, China Evergrande Group faces another bond interest payment after failing to make one last week, as the company’s worsening debt issue hovers over global markets and underscores funding dangers for other developers. Federal Reserve regulators in the United States have questioned several large banks about their exposure to Evergrande.
Published by Zack Baharum