Asian Shares Retreat As Yields Climb On Powell Comments

Asian stocks declined on Friday as a jump in U.S. bond yields following a disappointing Treasury auction coupled with Fed Chair Jerome Powell’s cautious comments on the rate hike path dashed expectations of a peak in U.S. interest rates.

Echoing recent hawkish statements from several officials, Powell said on Thursday that the Fed isn’t yet confident they had reached a sufficiently restrictive level of monetary policy to bring inflation down to the 2 percent target.

Powell’s comments pushed the dollar higher and dented demand for emerging market assets. Gold edged down on the dollar’s strength, while oil prices rose but were set for another weekly loss on demand concerns and easing Middle East tensions.

China’s Shanghai Composite Index dropped 0.5 percent to 3,038.97 on increased worries of faltering demand a day after data showed consumer price inflation in the country slipped back into contraction.

Hong Kong’s Hang Seng Index tumbled 1.8 percent to 17,203.26 after the Industrial and Commercial Bank of China, the world’s biggest lender, was hit by a cyberattack.

Japanese shares closed lower after tech investor Softbank posted an unexpected ¥931 billion ($6.2 billion) net loss in its second quarter, hit by falling valuations in portfolio companies.

Softbank shares plunged 8.2 percent, while the Nikkei 225 Index dipped 0.2 percent to 32,568.11. The broader Topix Index finished marginally higher at 2,336.72.

Seoul stocks ended notably lower, with the Kospi falling 0.7 percent to 2,409.66. Posco Holdings, SK Innovation and SK Bioscience plummeted 3-5 percent.

Australian markets declined on worries about increasing inflation and potential rate hikes. The benchmark S&P ASX 200 Index fell 0.6 percent to 6,976.50 after the Reserve Bank said in its quarterly statement of monetary policy that it expects inflation to return to the top of its 2-3 percent target only by end-2025. The broader All Ordinaries Index settled 0.5 percent lower at 7,176.60.

Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index slid 0.5 percent to 11,140.40 after the release of disappointing manufacturing data.

U.S. stocks fell overnight, while bond yields rose sharply following a disappointing sale of 30-year bonds and comments Fed Chair Jerome Powell that the U.S. central bank “will not hesitate” to resume raising rates if it becomes appropriate.

Powell said that inflation has slowed over the past year, but the process of getting inflation sustainably down to 2 percent has a long way to go.

The Dow dropped 0.7 percent, while the tech-heavy Nasdaq Composite shed 0.9 percent and the S&P 500 gave up 0.8 percent to snap their longest winning streaks in two years.

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