Asian markets sink on US yields, China row worries
Asian markets suffered more losses on Friday, hit by mounting fears about the path of United States interest rate hikes and the increasingly fraught relations between China and America.
Technology firms were among the worst hit following a news report that said Beijing had used microchips as part of a drive to steal technology secrets.
Traders tracked a selloff on Wall Street, where all three main indexes were hit by another increase in the 10-year US Treasury yield to a fresh seven-year high.
With Treasuries the key gauge for US Federal Reserve policymakers when deciding interest-rate hikes, markets are growing more concerned that the cost of borrowing will rise more than previously expected and hit the economy in turn.
This week also saw Fed chief Jerome Powell deliver a hawkish assessment of rates, which added fuel to the fire for many who are predicting a quick pace of hikes.
The prospect of borrowing costing more, slamming the door shut on a decade of ultra cheap cash, has sent investors running for the hills, with indebted emerging market economies in the spotlight as dollar- denominated repayments become harder.
“This week’s Fed speak does paint an exceedingly rosy picture of the US economy, the prospect of higher inflation and the Fed responding with even quicker and steeper rate hikes,” said Stephen Innes, head of Asia-Pacific trading at OANDA.
“Historically, faster-thanexpected Fed rate hikes have posed a considerable negative for equity markets,” he added.
Eyes are now on the release of US jobs data later on Friday, with a strong reading expected to push Treasury yields even higher.
While the trade war between Beijing and Washington has taken a back seat for now, fears over rates are driving selling.
Tech firms tank
Stocks in Hong Kong, where monetary policy is linked to the Fed because of the city’s dollar peg, fell 0.2 percent on Friday, having already lost more than 4 percent this week.
Chinese PC maker Lenovo plunged more than 15 percent and telecommunications equipment maker ZTE lost 11 percent after Bloomberg reported that Beijing used microchips inserted in US computer goods to steal technology secrets.
It said the chips were used on equipment made for Amazon and Apple, and possibly for other companies and government agencies. It claimed a unit of the People’s Liberation Army was involved in the operation.
“Electronics produced in China may be viewed unsafe due to this news, and tech shares are falling in general because of that,” Ray K W Kwok, an analyst at CGS- CIMB Securities Hong Kong, told Bloomberg News.
Stocks of other tech firms also went sharply lower. AAC Technologies, a Hong Kong firm listed in the city, sank more than 2 percent. In Taipei, HTC lost 1.6 percent; Realtek, more than 8.3 percent; and Delta Electronics, more than 4 percent.
Tokyo ended 0.8 percent lower, Singapore shed 0.7 percent, Seoul was 0.3 percent off, and Taipei sank 1.9 percent.
New Zealand, Mumbai and Jakarta were also down.
The chip report came as markets grow concerned about US- China relations, which have taken a hefty knock from tit-for-tat tariffs that have fanned worries of an all- out trade war between the world’s top two economies.
On Thursday US Vice President Mike Pence added to the uncertainty by accusing Beijing of military aggression, commercial theft and rising human rights violations, while saying it was bent on interfering in upcoming US elections.
“There can be no doubt: China is meddling in America’s democracy,” he warned.
China called the claims “ridiculous,” groundless and slanderous.
The chip story “plays heavily into the view that the Sino-US trade stoush is not just about Trump’s infatuation with the size of the US- China bilateral trade balance,” said Ray Attrill, head of foreign exchange strategy at the National Australia Bank.
“But it is a much more geopolitical affair, as well as being related to China’s desire to dominate the technology sphere. It means that an early resolution of SinoUS trade issued is not a realistic prospect.”
On oil markets, both main contracts edged up after seeing sharp losses on Thursday, having soared to fresh four-year highs on expectations next month’s Iran sanctions will hit global output levels.
In early European trade London was flat, while Paris and Frankfurt each fell 0.1 percent. AFP