Singapore: Yields on US Treasuries climbed to seven-month highs in Asia on Wednesday and the dollar rebounded as upbeat retail sales data added to evidence that America’s economy is gathering steam.
Stocks in Asia slid, however, after the Federal Reserve said the recovery was still too slow to bring down stubbornly high unemployment, and as investors continued to book profits from a long autumn rally before closing their books for year-end.
Energy and resource shares were under particular pressure as oil prices retreated and as investors switched out of big Australian miners which have outperformed in recent sessions.
At its last policy meeting of the year, the Fed offered only a cautious nod to improving prospects for the US Economy and reaffirmed its commitment to buy $600 billion in bonds to stimulate growth, despite fears of some economists that it could trigger inflation.
“The US Fed’s statement strengthened the likelihood the US would continue its quantitative measure. Combined with a good set of retail data, sentiment is still good,” said Hong Soon-pyo, a market analyst at Daishin Securities
Japan’s Nikkei fell 0.2% while the MSCI ex-Japan index of Asian stocks slid 0.6%, pressured by a late-day selloff in US markets overnight after the Fed’s assessment of the economy proved to be more sober than many traders would have liked.
Highlighting the risks still facing the global recovery, the Bank of Japan’s tankan survey showed Japanese manufacturers’ business sentiment worsened for the first time in nearly two years. In Europe, Spain saw a further spike in borrowing costs and Standard and Poor’s cut its outlook on Belgian debt to negative as the euro zone’s debt crisis continued to fester.
Treasury yields extend climb
US Treasury prices extended their recent losses as the Fed showed no signs of curtailing its economic stimulus measures.
The yield on 10-year Treasuries rose to just above 3.5%, its highest level since mid-May, compared with 3.28% late on Monday and 2.8% on 30 November. The benchmark notes are on track for their worst month since April 2004.
The US dollar index against a basket of other major currencies rose 0.2%, having climbed off a three-week low plumbed on Tuesday.
Oil prices eased 40 cents to $87.89 a barrel after the Fed dampened expectations for a faster recovery, which is seen as critical to reigniting oil demand in the world’s largest energy user.
Spot gold was little changed at $1,395.15 an ounce but under some pressure from the firming dollar.