Asian Stocks Down, Global Shares Selloff Continues as Treasury Yields Climb By

© Reuters.

By Gina Lee

– Asia Pacific stocks were mostly down on Wednesday morning, with surging U.S. Treasury yields contributing to the continuation of a global selloff. Investors also continue to weigh the likelihood of a tighter U.S. Federal Reserve monetary policy to curb inflation.

Japan’s Nikkei 225 slid 1.89% by 9:01 PM ET (2:01 AM GMT) and South Korea’s KOSPI edged down 0.11%

In Australia, the ASX 200 fell 0.51%. Data released earlier in the day showed that the Westpac Consumer Sentiment index contracted 2% in January, compared to the 1% contraction from the previous month.

Hong Kong’s Hang Seng Index inched up 0.05%. China’s Shanghai Composite edged down 0.15% while the Shenzhen Component inched up 0.07%.

Global shares have had a volatile start to 2022, with challenges including a hawkish Fed, the economic impact from the omicron COVID-19 variant, and rising inflation. Higher bond yields are also forcing investors to re-evaluate valuations across a range of assets.

“Generally, we do expect to see that the bond market is going to drive volatility, more broadly based, across the equity markets and other markets as well,” CreditSights global head of strategy Winnie Cisar told Bloomberg.

She was also a little concerned about corporate earnings last quarter and in the first half of 2022, as they could miss high expectations.

In the U.S., Tuesday’s data showed that the NY Empire State manufacturing index fell to 0.70 in January. Housing data, including building permits, is due later in the day.

The question investors are wrestling with most is if the U.S. Federal Reserve will need to tighten monetary policy to guide inflation lower, or if a softening in economic growth will allow the central bank to be less aggressive in tightening, 22V Research founder Dennis DeBusschere told Bloomberg.

The former would be “terrible” for cyclical and technology shares, he added.

On the company front, Goldman Sachs Group Inc.'s (NYSE:GS) trading revenue for the fourth quarter of 2021 was worse than expected, in turn weighing on banks. Alibaba (NYSE:BABA) Group Holding Ltd.'s (HK:9988) U.S. shares fell over a report that the U.S. is reviewing its cloud business to evaluate the risk to national security.

Companies including Morgan Stanley (NYSE:MS), Bank of America Corp. (NYSE:BAC), UnitedHealth Group Incorporated (NYSE:UNH), and Netflix Inc. (NASDAQ:NFLX) will publish their earnings throughout the week.

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