BANGKOK (AP) – Stocks were mostly down in Asia on Friday after stocks retreated from their recent highs on Wall Street as bond yields fell and investors became cautious.
Tokyo’s Nikkei 225 lost almost 2%. Shares fell in Seoul, Sydney and Shanghai but rose in Hong Kong.
US futures fell and the yield on the 10-year Treasury bill rose to 1.34%. On Thursday, it fell to 1.30%, its lowest level since February. It was recently trading at 1.74%.
Traders have shifted money to bonds in recent weeks, driving down the benchmark yield, which is used to set the rates on mortgages and many other types of loans.
Tokyo’s Nikkei 225 lost 1.7% to 27,633.10 while South Korea’s Kospi fell 1.5% to 3,201.86.
In both countries, authorities have stepped up pandemic precautions to counter new coronavirus epidemics. Reinforcing the relatively loose restrictions, Japanese Prime Minister Yoshihide Suga ordered a state of emergency for Tokyo, until 23 July-August. 8 Olympic Games.
Investors are assessing the potential impact of COVID-19 variants hampering a resurgence in trade and travel. Fans have been banned from the Tokyo Olympics following the state of emergency aimed at containing the increase in coronavirus infections in the capital.
The Sydney S & P / ASX 200 lost 1.3% to 7,245.10 while the Shanghai Composite Index lost 0.7% to 3,501.16. Stocks also fell in India and Taiwan, but rose in Hong Kong, where the Hang Seng index gained 0.7% to 27,330.71.
On Thursday, the S&P 500 fell 0.9% to 4,320.82, dragged down by a large drop driven mainly in technology, financial, industrial and communications companies.
The Dow Jones Industrial Average lost 0.7% to 34,421.93. The Nasdaq composite hit three-day closing highs, falling 0.7% to 14,559.78.
Small business shares also fell. The Russell 2000 Index slipped 0.9% to 2,231.68.
Long-term bond yields tend to move with investors’ expectations for inflation and economic growth. Both are still very strong and much higher than they have been in recent years. But Wall Street increasingly suspects they have already peaked as the economy passes the initial catapult phase of its recovery from the pandemic.
Part of the sharp decline in long-term bond yields could also be attributed to investors quickly reversing bets that they would continue to raise as the economy continued its strong recovery.
Two recent reports have shown that the manufacturing and service sectors are still growing, but slower than in previous months and falling short of economists’ expectations.
On Thursday, the Labor Department said the number of Americans claiming unemployment benefits rose slightly last week, even as the economy and labor market appear to rebound from the coronavirus recession.
Investors are increasingly nervous about potential measures by central banks, especially the US Federal Reserve, to end lavish support for markets that collapsed at the start of the pandemic.
Minutes from the June Fed meeting showed that officials are moving closer to cutting bond purchases, although most analysts don’t expect a cut until the end of the year. At that meeting, policymakers said they plan to hike interest rates as early as 2023, earlier than expected.
Rail stocks were the biggest losers in the S&P 500 on Thursday following a released report indicating that the Biden administration planned to sign an executive order next week ordering regulators to take action against consolidation and anti-competitive pricing in the rail and maritime transport sectors. The report, published by the Wall Street Journal, quotes an anonymous source familiar with the situation. Kansas City Southern fell 7.9% for the S&P 500’s biggest loss. Norfolk Southern slipped 7.2%, CSX fell 6.2% and Union Pacific closed 4.4% lower.
Investors will turn their attention to corporate earnings from next week, when big banks like JPMorgan Chase, Goldman Sachs and Bank of America report their results. Banks tend to be a proxy for the overall economy, so investors will carefully analyze reports and listen to what banks say about the state of lending and spending as the recovery continues.
AP Business editors Alex Veiga and Damian J. Troise contributed.
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