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Global Markets: Asian shares edge down as U.S. yields climb, North Korea suspends talks

Reuters  |  SHANGHAI/TOKYO 

By and Tomo Uetake

SHANGHAI/TOKYO (Reuters) - Asian stock markets dipped on Wednesday after abruptly called off talks with Seoul, throwing a U.S.-North Korean summit into doubt, while surging yields revived worries about faster U.S. interest rate hikes that could curb global demand.

MSCI's broadest index of shares outside was down 0.1 percent as Pyongyang's move appeared to mark a break in months of warming ties between North and and with

European shares looked set to open flat to marginally higher on Wednesday and U.S. futures were little changed.

Financial spread-betters expect London's FTSE to open 3 points higher at 7,725, Frankfurt's DAX to open 19 points higher at 12,989 and Paris' CAC to open unchanged at 5,533.

A cancellation of the June 12 summit in could see tensions on the flare again as investors worry about China-U.S. trade tensions and the sustainability of global economic growth.

"This will weigh on the Korean reconstruction beneficiaries that have had a strong run on peace and even reunification hopes recently," analysts wrote in a note.

"The broader risk for the region if talks do break down is that Trump no longer feels the need to keep on side and could escalate trade tensions again."

Strong U.S. sales and factory data on Tuesday pushed the U.S. 10-year yield through a key level to hit 3.095 percent, its highest since July 2011, raising worries about higher borrowing costs for companies worldwide.

The 10-year yield was last at 3.071 percent.

The rise in yields hurt U.S. share markets on concerns it would undercut stock valuations. [.N]

The Dow Jones Industrial Average fell 193.00 points, or 0.78 percent, to 24,706.41, the 500 lost 18.68 points, or 0.68 percent, to 2,711.45 and the dropped 59.69 points, or 0.81 percent, to 7,351.63.

Elsewhere in Asia, Japan's Nikkei slid 0.4 percent, while South Korea's struggled for traction.

Stocks in dipped 0.3 percent as traders awaited from a second round of Sino-U.S. trade talks in this week, with both sides believed to be still far apart. But Australian stocks bucked the trend and advanced 0.2 percent.

CURRENCIES

The strong U.S. data underpinned the dollar in currency markets.

The U.S. dollar index, which tracks the greenback against a basket of six major rivals, hit a 2018 high of 93.46 on Tuesday and last stood at 93.22.

The euro fell to as low as $1.1814, its lowest level in five months.

The dollar held firm at 110.24 yen having hit a near four-month high of 110.45 yen on Tuesday.

The yen largely shrugged off data that showed Japan's shrank more than expected in the January-March quarter.

"U.S. data assured that the world is still in a synchronised global growth. If U.S. had been a disappointment, the market would have taken Japan's GDP more negatively," said Tohru Yamamoto, at

High-yielding Asian currencies were particularly vulnerable to higher U.S. yields, which could prompt investors to shift funds out of emerging markets.

The Indonesian rupiah hit a 2-1/2-year low while the Malaysian ringgit hit a four-month low.

The Indian rupee unexpectedly gained 0.5 percent on suspected currency market intervention by the central after hitting a 16-month closing low of 68.15 per dollar on Tuesday.

The South Korean won was steadier but the country's yields rose to the highest level since late 2014.

Some market participants think emerging market assets would be better placed than they were in the past, when hints the would taper its knocked their prices.

"What we see today is a reallocation to the U.S. because of a strong U.S. I don't expect panic selling in emerging markets for now," said Daiwa's Yamamoto.

He also said he does not see the U.S. 10-year yield rising further towards 3.5 percent given the Fed's estimate of neutral U.S. interest rates is much lower.

John Williams, who is about to assume a vice chairmanship as of the New York Fed, said on Tuesday that the neutral rate remained around 2.5 percent.

In commodities markets, gold slightly rebounded after hitting a 4 1/2-month low the previous day on a strong dollar.

It stood at $1,294 per ounce, off Tuesday's low of $1,289.30.

prices remained near recent highs amid concerns U.S. sanctions on may restrict crude exports from a

U.S. light crude was 0.4 percent lower at $71.06 after reaching $71.92 on Tuesday, its highest level since November 2014.

Brent traded at $78.21 a barrel, down 0.3 percent. On Tuesday, it reached an intraday peak of $79.47 a barrel, its highest since November 2014.

(Reporting by and Tomo Uetake, additional reporting by in SYDNEY; Editing by and Kim Coghill)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, May 16 2018. 12:35 IST
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