Asian Shares Set for Monthly Loss on Bond Rout

Asian stocks were on the defensive on Wednesday as the dollar held near a one-year high. Treasury yields started edging up again, affecting sentiment even as Chinese data showed signs of a solid global economic recovery.

ANZ analysts wrote in a note that markets are watching closely. This is to gauge the damage and potential ripple effects caused by the Archegos Capital Management crisis.

For some, this serves as a timely reminder that while pandemic risks are abating, financial market risks remain elevated, ANZ added.

Some global banks are facing billions of dollars in losses after this investment firm defaulted on margin calls. Investors are also concerned about who else might be exposed.

MSCI’s broadest index of Asia-Pacific shares outside of Japan was last at 680.04. It has calmed from a one-week high of 682.36 points. Just last month, it touched an all-time peak of 745.89.

The index is currently down 1.6%, likely to be on track for its first loss in five months. It is also on course for its fourth consecutive quarterly gain. However, this will be with the smallest increase since a 21% fall in March last year as the coronavirus put the world on hold.

A surge in bond yields has set off the risk-off mood lately. Just this quarter, the U.S. Treasury yields skyrocketed 83 basis points. It was the biggest increase in over a decade.

This rise has made equity valuations look elevated, particularly for major tech companies that have suffered the worst sell-off impact.

On Wednesday, 10-year Treasury yields climbed as high as 1.742% from Tuesday’s 1.708%.

Technology Stocks

In a note to clients, Blackrock said, tech is a diverse sector, and the driver of higher yields matters more than the rise itself.

Their new nominal theme implies that central banks will be slower to raise rates to curb inflation than in the past. This is supporting their pro-risk stance and preference for tech.

Stocks on The Move

Despite data showing China’s factory activity expanded in March, sentiment remained downbeat in Asia. China’s services sector surged as well.

Chinese shares deepened their losses as the blue-chip index lost 1.1%. In Hong Kong, the Hang Seng index shed 0.2%.

The Nikkei fell 0.7% as Japan’s industrial output dropped in February. This was due to declines in electrical machinery and the production of cars.

Australia’s benchmark index was up 1.5%. Moreover, New Zealand gained 0.8%, while South Korea’s KOSPI index added 0.1%.

S&P 500 (ESc1) E-mini futures for the S&P 500 were a shade higher.