Asian shares trade mixed on recovery hopes, yield worries

TOKYO (AP) — Asian shares were mixed Tuesday, cheered by the imminent passage of the U.S. stimulus package, although that optimism was tempered by worries about inflation and the coronavirus pandemic.

Japan's benchmark Nikkei 225 added 0.2% to 28,800.81 in morning trading. South Korea's Kospi slipped 1.2% to 2,960.17. Australia's S&P/ASX 200 added 0.3% to 6,760.10. Hong Kong's Hang Seng gained 1.3% to 28,918.99, while the Shanghai Composite slipped 0.6% to 3,402.61.

Jingyi Pan, senior market strategist with IG in Singapore, said Asian markets were weighing “the impact of a global recovery alongside the prospect of an accelerating climb in U.S. bond yields.”

Yoshimasa Maruyama, chief market economist for SMBC Nikko Securities, said the global economic rebound is stronger than some had previously expected, and that recognition is becoming more widespread in March than in February.

“And this recognition of recovery in March itself will work as a source for more confidence,” he said.

The vaccine rollouts in the U.S. and Europe will also help instill confidence in future growth, he added.

Revised economic data for October-December, released Tuesday, showed the Japanese economy grew at an annual pace of 11.7%. That was weaker than the 12.7% growth reported last month in the preliminary estimate.

Quarter on quarter, the growth was 2.8%, revised from 3%, as public and private investment was not as positive as initially thought. Japan’s economy expanded at a 22.8% pace in the July-September period. That followed a sharp contraction as the pandemic slammed tourism, trade, consumption and production.

On Wall Street, U.S. stock indexes closed mostly lower, as higher bond yields helped set off more heavy selling of shares in technology companies.

The S&P 500 fell 0.5% to 3,821.35 after gaining 1% earlier. Because of their huge size, drops by Apple, Google's parent company and other major technology stocks helped drag the S&P 500 into the red, even though more stocks rose than fell in the benchmark index.

The selling, which accelerated toward the end of the day, left the tech-heavy Nasdaq composite down 10.5% from the all-time high it reached on Feb. 12. A drop of 10% or more from a recent peak is known on Wall Street as a “correction.”

Bond yields rose broadly. The yield on the 10-year Treasury note climbed to 1.60% from 1.55% late Friday. But it fell back to 1.57% after hours.

Yields have been marching higher with rising expectations for growth and the inflation that could follow. Higher yields put downward pressure on stocks generally, in part because they can steer away dollars that might have gone into the stock market into bonds instead. That makes investors less willing to pay such high prices for stocks, especially those that look the most expensive, such as technology stocks.

The Dow Jones Industrial Average rose 1% to 31,802.44. The Nasdaq lost 2.4% to 12,609.16.

Smaller company stocks, which have led the market higher this year, notched more gains. The Russell 2000 index added 0.5% to 2,202.98.

Financial stocks had some of the best gains. Wells Fargo rose 3.3% and Citigroup gained 2.8%.