BANGKOK– Asian shares fell on Tuesday following a slump on Wall Street as higher yields in the US bond market piled pressure on equities.
The Shanghai Composite index lost 1.7% to 3,007.07, although the Chinese government reported that the economy grew surprisingly fast at an annual rate of 5.3% in the first quarter of the year. On a quarterly basis, growth increased by 1.6%.
Hong Kong’s Hang Seng lost 2.1% to 16,248.97.
Tokyo’s Nikkei 225 fell 1.9% to 38,471.20, while the dollar continued to rise against the Japanese yen, hitting new 34-year highs. By late afternoon, the dollar was trading at 154.41 yen, up from 154.27 yen.
The euro fell from $1.0626 to $1.0621.
Elsewhere in Asia, Taiwan’s Taiex led the regional decline, down 2.7%. Bangkok markets were closed for Songkran holidays.
In South Korea, the Kospi fell 2.3% to 2,609.63, while the Australian S&The P/ASX 200 fell 1.8% to 7,612.50.
On Monday the S&The P500 plunged 1.2% to 5,061.82, following last week’s 1.6% loss, the worst since October. The Dow Jones Industrial Average fell 0.7% to 37,735.11, and the Nasdaq composite fell 1.8% to 15,885.02.
Stocks were solidly higher earlier in the day as oil prices fell on hopes that international efforts to calm escalating tensions in the Middle East could help. But Treasury yields also shot up after the latest report on the U.S. economy, exceeding expectations.
The economy and financial markets are in an awkward phase where such a force raises hopes of growing corporate profits but also hurts prospects for a more accommodative Federal Reserve interest rate.
Traders want lower interest rates, which could boost the overall economy, and much of the U.S. stock market’s recent record rise was based on expectations of cuts.
But strong reports like Monday’s, which showed U.S. shoppers increased their spending at retailers more than expected last month, have traders predicting roughly only one or two interest rate cuts this year, according to data from CME Group. That is lower than expectations for six or more cuts at the beginning of this year. Some traders are bracing for possible no cuts as inflation and the overall economy have remained stubbornly above expectations this year.
High interest rates and bond yields negatively impact the prices of all kinds of investments, especially those that look expensive or compete for the same types of investors as bonds.
Of greater influence was the weakness for Big Tech stocks. Apple fell 2.2%, Nvidia fell 2.5% and Microsoft fell 2%. They have benefited from low interest rates in the past and often feel pressure when interest rates rise. Because they are also the largest stocks on Wall Street, their moves weigh extra heavily on the S&P500 and other indexes.
Microsoft, for example, swung from an early 1.2% gain to an afternoon loss and was the second biggest force to hit the S.&P500.
Some financial companies helped contain losses and reported encouraging profit figures for the start of the year. The pressure is on companies in general to realize bigger profits, as interest rates appear to provide much less support in the short term.
In the oil market, a barrel of U.S. crude for May delivery fell 10 cents to $85.31 a barrel in electronic trading on the New York Mercantile Exchange. It fell 25 cents to $85.41 on Monday after political leaders urged Israel not to retaliate after Iran’s attack on Saturday, which involved hundreds of drones, ballistic missiles and cruise missiles.
Brent crude, the international standard, lost 8 cents to $90.02 a barrel. On Monday, oil prices fell 35 cents to $90.10 per barrel.
This year’s rise in oil prices has raised concerns about a knock-on effect on inflation, which has remained stubbornly high. After cooling sharply last year, inflation has exceeded expectations every month so far in 2024.