HONG KONG (AP) — Asian shares decline as the possibility of a 5% yield on the 10-year U.S. Treasury for the first time since 2007 puts pressure on Wall Street.
U.S. futures are lower while oil prices rise after the Department of Energy announced two separate offers of crude purchase intentions for the Strategic Petroleum Reserve (SPR) on Thursday. The Biden administration’s last announcement of such a purchase was in July.
The escalating conflict in the Middle East is causing supply concerns, “which is definitely bad news for inflation,” said Fatih Birol, executive director of the Paris-based IEA, told The Associated Press. Developing countries that import oil and other fuels would be most affected by higher prices, according to Birol.
Tokyo’s Nikkei 225 index falls 0.3% to 31,338.51 after the government reports higher-than-expected consumer inflation in September. The core inflation rate, excluding volatile fresh food prices, rose 2.8% from a year earlier in September.
This is the first time in 13 months that core CPI inflation has fallen below 3%. However, when excluding both fresh food and fuel prices, inflation was 4.2%, still close to the 40-year peak of 4.3% recorded earlier this year.
China announces on Friday that it is keeping its benchmark lending rates unchanged, with the one-year loan prime rate at 3.45% and the five-year LPR at 4.20%, in line with market expectations.
Hong Kong’s Hang Seng drops 0.7% to 17,177.38 and the Shanghai Composite index falls 0.8% to 2,980.55.
The Kospi in Seoul loses 1.4% to 2,380.92. Australia’s S&P/ASX 200 sinks 1.2% to 6900.70. India’s Sensex is 0.2% lower and Bangkok’s SET falls 1.3%.
On Thursday, the S&P 500 falls 0.8% to 4,278.00, following a mixed set of profit reports from Tesla and other influential companies. The Dow Jones Industrial Average drops 0.7% to 33,414.17 and the Nasdaq composite sinks 1% to 13,186.18.
The 10-year Treasury yield, which helps set prices for investments and loans, rises to 4.99%, its highest level since 2001. The yield later pulls back to 4.98%. Early Friday, the yield is at 4.94%.
Fed Chair Jerome Powell says in a speech Thursday that the Fed could raise interest rates again if U.S. economic growth appears persistently strong. A higher 10-year yield makes mortgages more expensive, reduces prices for investments, and increases borrowing costs for companies.
Weekly applications for unemployment benefits in the U.S. are lower than expected, indicating low levels of layoffs nationwide.
However, there are reports of weakening manufacturing in the mid-Atlantic region, which is greater than economists anticipated. Sales of previously owned homes also decline, although not as much as economists expected.
The rise in bond yields affects all stocks, especially those with expectations for future growth. This has recently put focus on Big Tech.
Tesla’s stock falls 9.3% after reporting weaker results for the summer than analysts expected. On the other hand, Netflix jumps 16.1% after reporting stronger profit for the latest quarter than analysts anticipated.
Overall, analysts predict slight growth in earnings per share for companies across the S&P 500 index this summer compared to a year earlier. This would be the first growth in a year.
A barrel of benchmark U.S. crude rises to $89.05 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, is up to $92.02 per barrel.
In currency trading, the U.S. dollar slightly strengthens to 149.92 Japanese yen from 149.78 yen. The euro remains unchanged at $1.0575.
