Australia

Australian shares are set to follow Wall St lower as the Fed's vow to keep credit flowing pushed up bond yields.

The Australian SPI 200 futures contract was down 13 points, or 0.2 per cent, at 6,740 points at 8.30am Sydney time on Friday, suggesting a negative start to trading.

Wall Street slumped on Thursday and global stock markets declined after US Federal Reserve Chair Jerome Powell repeated his pledge to keep credit flowing until Americans are back to work, pushing back at investors who have doubted if he can hold that promise after the pandemic.

Benchmarket US Treasury yields rose toward last week’s highs as Powell spoke, and the dollar jumped.

The Dow Jones Industrial Average fell 350.11 points, or 1.12 per cent, to 30,919.98, the S&P 500 lost 47.21 points, or 1.24 per cent, to 3,772.51 and the Nasdaq Composite dropped 246.59 points, or 1.9 per cent, to 12,751.16.

Locally, India is moving to fill the Chinese vacuum for Australian resources and wine, as a free-trade agreement between Canberra and New Delhi gains momentum under a Morrison government push to unlock new markets, The Australian reports.   

Australia's share market has closed lower after some of its biggest companies traded ex-dividend.

The S&P/ASX200 benchmark index closed lower by 57.3 points, or 0.84 per cent, to 6,760.7 on Thursday.

The All Ordinaries closed lower by 67.3 points, or 0.95 per cent, at 7,000.6.

Most sectors were lower.

Gold was down 0.9 per cent at $US1,696.50 an ounce; Brent oil was up 4.5 per cent to $US66.92 a barrel; Iron ore was up 0.9 per cent to $US177.98 a tonne.

Meanwhile, the Australian dollar was buying 77.15 US cents at 8.30am, down from 77.99 US cents at Thursday’s close.

Asia

In China, the Shanghai Composite Index closed at 3,503.49, down 2.05 per cent, and Shenzhen Component Index finished at 14,416.06, down 3.46 per cent.

In Hong Kong, the Hang Seng Index closed at 29,236.79, down 2.15 per cent.

Japan’s Nikkei index on Thursday dropped to its lowest in one month, as investors sold off heavyweights including SoftBank Group and Fast Retailing, tracking a slump in US futures during the Asian trade.

The Nikkei share average closed 2.13 per cent weaker at 28,930.11, the lowest since 5 February, while the broader Topix lost 1.04 per cent to 1,884.74.

Europe

European stocks closed lower on Thursday as a renewed rise in US bond yields and expectations of a jump in inflation hit risk appetite, with heavyweight miners and technology stocks leading losses.

The pan-European STOXX 600 index fell 0.4 per cent, with miners dropping the most among the European sectors. UK-listed heavyweights Rio Tinto and BHP Group shed 7.7 per cent and 5.8 per cent, respectively, as they traded ex-dividend.

Technology stocks, the driver of the market’s rebound from pandemic-driven lows, fell 3.3 per cent as a global semiconductor shortage weighed on the sector, while a rise in bond yields also spurred more scrutiny of high stock valuations.

Dutch firm ASML Holding NV dropped 6.1 per cent despite news that it had extended a deal to sell chip manufacturing equipment to China’s largest chipmaker SMIC.

“While one can understand why investors are concerned about valuations in the US, particularly around the tech sector ... the same can’t be said in Europe, where valuations are much lower,” Michael Hewson, chief market analyst at CMC Markets wrote in a note.

Unlike US stocks, the STOXX 600 has yet to reach pre-pandemic highs, as a fresh round of lockdowns and sluggish economic growth cut short an early bounceback from lows hit last March.

Market participants were also waiting for comments from Federal Reserve Chairman Jerome Powell regarding the recent jump in borrowing costs.

European Central Bank policymaker Klaas Knot said the recent rise in euro zone borrowing costs may reflect improved growth and inflation prospects.

“A steepening curve is to some extent a sign that monetary policy is bearing fruit,” analysts at Rabobank wrote in a note. “However, (the ECB) are also wary that too rapid an increase could stop the fragile recovery in its track.”

Euro zone bond yields are significantly lower than those in the US, with many investors welcoming the recent rise in yields as signs of economic reflation.

Defensive sectors such as utilities, food & beverage and real estate all advanced.

Among individual movers, Unibail-Rodamco-Westfield - Europe’s biggest retail property owner—topped the STOXX 600 after French tycoon Xavier Niel raised his stake in the firm.

German broadcaster Prosiebensat.1 Media fell 7.3 per cent after forecasting that revenue and profits would grow in single digits this year, after a strong showing in the fourth quarter.

German airline Lufthansa slipped 3 per cent as it posted record losses for 2020 and trimmed its 2021 capacity plans as covid-19 disruption drags on.

North America

Wall Street slumped on Thursday and global stock markets declined after US Federal Reserve Chair Jerome Powell repeated his pledge to keep credit flowing until Americans are back to work, pushing back at investors who have doubted if he can hold that promise after the pandemic.

Benchmarket US Treasury yields rose toward last week’s highs as Powell spoke, and the dollar jumped.

Oil prices spiked as OPEC and its allies agreed to extend most oil output cuts into April, after deciding that the demand recovery from the coronavirus pandemic was still fragile.

With covid-19 vaccines rolling out and the government fiscal taps open “there is good reason to think we will make more progress soon” toward the Fed’s goals of maximum employment and 2 per cent sustained inflation, Powell told a Wall Street Journal forum.

But “even if that happens it will take substantial time,” Powell added.

The Dow Jones Industrial Average fell 350.11 points, or 1.12 per cent, to 30,919.98, the S&P 500 lost 47.21 points, or 1.24 per cent, to 3,772.51 and the Nasdaq Composite dropped 246.59 points, or 1.9 per cent, to 12,751.16.

“This market has already been weak and was looking for another excuse to sell, said Dennis Dick, head of markets structure and a proprietary trader at Bright Trading LLC in Las Vegas, citing fear in equities markets for the past nine months. “Now, Powell gives them that excuse as well.”

The pan-European STOXX 600 index lost 0.37 per cent and MSCI’s gauge of stocks across the globe shed 1.56 per cent, its third day of losses.

Emerging market stocks lost 2.54 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 2.57 per cent lower, while Japan’s Nikkei lost 2.13 per cent to its lowest since Feb. 5.

Worries about loftier US bond yields have also hit global shares.

Powell said the increase was “notable” but he did not consider it a “disorderly” move, or one that pushed long-term rates so high the Fed might have to intervene to bring them down.

Benchmark 10-year notes last fell 22/32 in price to yield 1.5449 per cent, from 1.47 per cent late on Wednesday. They earlier touched their highest levels since a one-year high of 1.614 per cent set last week on bets on a strong economic recovery aided by government stimulus and progress in vaccination programs.

The cost of borrowing US Treasuries in the overnight repurchase agreement, or repo market, went negative on Thursday, analysts said, amid the bond market sell-off, which pointed to stress in money markets.

The 10-year UK Gilts yield was last at 0.733 per cent, after touching 0.796 per cent on Wednesday, near last week’s 11-month high of 0.836 per cent.

Germany’s 10-year yield was down 2 basis points to -0.31 per cent after rising 5 basis points on Wednesday.

Many Fed officials have downplayed the rise in Treasury yields in recent days, although Fed Governor Lael Brainard on Tuesday acknowledged that concerns over the possibility a rapid rise in yields could dampen economic activity.

The spectre of high US bond yields also undermined low-yielding, safe-haven assets, such as the yen, the Swiss franc and gold.

Currency investors continued to snap up dollars as they bet on the US economy outperforming its peers in the developed world in coming months.

The dollar index rose 0.564 per cent, with the euro down 0.78 per cent to $1.1968.

The Japanese yen weakened 0.82 per cent versus the greenback. Dollar/yen rose to 107.90, roughly a seven month high, while Sterling was last trading at $1.389, down 0.45 per cent on the day.

Other safe-haven currencies were weakened, with the Swiss franc dropping to a five-month low against the dollar and a 20-month trough versus the euro.

Rising Treasury yields pushed non-interest-bearing gold down 0.9 per cent. Spot gold dropped 0.8 per cent to $1,697.56 an ounce, but still near a nine-month low.

Investor focus on a US economic rebound was unshaken by data released overnight that showed the labor market struggling in February, when private payrolls rose less than expected.

Oil prices rose for a second straight session as OPEC and its allies agreed to extend most oil output cuts into April, after deciding that the demand recovery from the coronavirus pandemic was still fragile.

US crude recently rose 4.57 per cent to $64.08 per barrel and Brent was at $67.00, up 4.57 per cent on the day.

With Reuters