Asian Equities Rebound as Investors Weigh Rising Global Yields

Key Moments

Asian Markets Firm as Financials and Tech Lead Gains

Asian equity markets mostly traded higher on Tuesday, recovering even as the prior U.S. session saw equities retreat under the pressure of rising global bond yields. U.S. equity futures and crude oil prices showed little movement in early trading.

Japan’s Nikkei 225 advanced 0.5% to 49,534.36, supported by strength in financial shares after the central bank governor suggested a possible interest rate increase this month.

Hong Kong’s Hang Seng index rose 0.7% to 26,209.07, while mainland China’s Shanghai Composite index edged down 0.3% to 3,902.78. In Australia, the S&P/ASX 200 added 0.2% to 8,582.80.

South Korea’s Kospi climbed 1.5% to 3,977.85, driven by demand for technology names. Samsung Electronics gained 2.8%, and chip maker SK Hynix jumped 3.4%. Taiwan’s Taiex benchmark rose 1%, while India’s Sensex slipped 0.1%.

Major Index Moves

Wall Street Pulls Back After Strong Run

U.S. equities lost ground on Monday, interrupting a recent advance. The S&P 500 declined 0.5%, snapping a five-session winning streak, and finished at 6,812.63. The Dow Jones Industrial Average fell 0.9% to 47,289.33, and the Nasdaq composite slipped 0.4% to 23,275.92.

Last week’s rally in U.S. stocks had been fueled by growing expectations that the Federal Reserve will lower its key interest rate next week in an effort to support a cooling labor market.

Manufacturing employment remains under strain, with most participants in a survey by the Institute for Supply Management indicating that they are concentrating more on managing existing headcount than on adding workers. Some manufacturers also reported that tariffs continue to complicate operations.

“Conditions are more trying than during the coronavirus pandemic in terms of supply chain uncertainty,” one manufacturer told the ISM.

Global Yields Rise on Bank of Japan Signals

Longer-dated U.S. Treasury yields moved higher in line with a broader global upswing in bond yields after Bank of Japan Governor Kazuo Ueda signaled that the central bank may lift its benchmark interest rate at its meeting later this month.

Japan’s key policy rate has stayed near zero for years as policymakers attempted to bolster weak economic growth. Inflation is now running above the Bank of Japan’s roughly 2% target.

“The prospect of the Bank of Japan resuming its hiking cycle a bit sooner than previously thought has sent tremors through global bond and equity markets this week, but we suspect they could nonetheless weather further tightening,” Thomas Mathews of Capital Markets said in a commentary.

Higher bond yields can pull in investors who might otherwise allocate to equities or digital assets and typically weigh on valuations across many asset classes, especially those perceived as richly priced.

Crypto Retreats; Synopsys-Nvidia Deal Lifts Selected Tech

Bitcoin, which had been trading around $125,000 in October, fell toward $85,500. That represented a decline of roughly 6% from a day earlier. Early Tuesday, it was changing hands near $86,650.

Shares tied to the cryptocurrency sector weakened. Coinbase Global fell 4.8%, and Robinhood Markets dropped 4.1%.

On the positive side of the U.S. market, Synposys gained 4.9% after it reported that Nvidia is investing $2 billion in its shares as part of an expanded partnership. Nvidia, described as Wall Street’s most influential stock, reversed an initial loss to close with a 1.6% gain.

Mixed Signals From U.S. Consumer Spending

Equities reacted unevenly to what appeared to be a solid beginning to the holiday shopping period. Consumer outlays during the Black Friday and Cyber Monday stretch were expected to surpass earlier projections, even as uncertainty around the U.S. economic outlook persisted.

Williams-Sonoma advanced 1.3%, while Best Buy declined 2.6%, highlighting the divergence within the retail space.

European Stocks Edge Lower; Airbus Hit by Software Issue

In Europe, France’s CAC 40 index slipped 0.3% on Monday, weighed down partly by a 5.8% drop in Airbus shares.

The company said that most of its fleet of 6,000 A320 passenger aircraft had received a software update following a weekend glitch that had the potential to affect flight controls. Travelers experienced minor disruptions as airlines rushed to implement the updates after Airbus flagged the issue on Friday.

Commodities and Currencies

In early Tuesday trading, U.S. benchmark crude oil edged up 2 cents to $59.34 per barrel. Brent crude, the global pricing benchmark, slipped 4 cents to $63.13 per barrel.

On the currency front, the U.S. dollar strengthened to 155.61 Japanese yen from 155.41 yen. The euro rose to $1.1612 from $1.1608.