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Global debt sell-off hits Asian stocks and bonds

Friday 3.30 BST

Overview

The global government bond sell-off continued in Asia and the dollar held at eight-month lows as stocks were hit by a poor performance overnight on Wall Street.

Hot topic

The sell-off in sovereign bonds continued as this week’s flurry of central bank comments were largely viewed by investors as more hawkish than expected and German inflation data released yesterday beat expectations, supporting the European Central Bank’s recent stance.

Investors characterised remarks made by ECB president Mario Draghi on Tuesday as suggesting the central bank’s monetary policy could become less accommodative starting next year. Mark Carney, Bank of England governor, later said he was prepared to raise interest rates if UK business activity increased.

The yield on 10-year Japanese government bonds was up 1.8 basis points to 0.065 per cent. Bond yields move in the opposite direction to price.

The equivalent yield on Australian bonds was up 6.9 basis points to 2.570 per cent, the biggest weekly rise in yields since the week of the US election.

The yield on New Zealand 10-year bonds rose 9.1 basis points to 2.952 per cent.

The yield on the benchmark 10-year US Treasury was up 4.4 basis points in Asia at 2.263 per cent.

Equities

Asia-Pacific equities tracked Wall Street lower following a sell-off for tech stocks.

Japan’s Topix index was down 1 per cent with the information technology sector falling 1.7 per cent.

In Hong Kong the Hang Seng was down 1 per cent with tech heavyweight Tencent falling as much as 2.3 per cent to be among the worst performers on the index. The Shanghai Composite was down 0.2 per cent while the Shenzhen Composite was off 0.1 per cent.

Australia’s S&P/ASX 200 shed 1.7 per cent with the financials and materials sectors down 1.1 per cent and 1.3 per cent respectively.

The S&P 500 index closed 0.9 per cent lower at 2,419, while the tech-heavy Nasdaq Composite fell 1.4 per cent.

Forex

The dollar index tracking the greenback against a weighted basket of peers was down 0.2 per cent at 95.481, holding at its lowest level since October.

The euro was flat against the dollar at $1.1442, holding at a one-year high.

The Japanese yen was 0.4 per cent stronger against the dollar at ¥111.78. The Australian dollar was 0.2 per cent stronger at $0.7701 hitting a three-month high.

Commodities

The international benchmark Brent crude was up 0.8 per cent at $47.80 a barrel. US marker West Texas Intermediate was 0.8 per cent higher at $45.28 a barrel.

Gold was flat at $1,245.52 an ounce.

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