Asian markets experienced a decline on Tuesday, as investor sentiment was dampened by the rise in bond yields. Hong Kong's Hang Seng index dropped more than 3% as investors sold off property shares, while the Nikkei 225 in Tokyo fell 1.7% to 31,231.37. The S&P/ASX 200 in Australia skidded 1.3% to 6,943.40, and India's Sensex declined 0.6% to 65,462.02. The SET in Bangkok and Taiwan's Taiex also fell by 1.4% and 0.6% respectively.
In contrast, shares of troubled real estate developer China Evergrande (HK:3333) surged nearly 16%, resuming trading after a suspension last week when the company announced its chairman was under investigation. Despite this, the Hang Seng index remained down by midday at 17,278.37.
On Wall Street, Monday's session ended with little change for the S&P 500, while the Dow Jones Industrial Average slipped by 0.2%. The Nasdaq composite managed to rise by 0.7%.
Oil and gas stocks sank as crude prices retreated from their sharp gains since the summer. U.S. benchmark crude oil was down 71 cents at $88.11 per barrel in electronic trading on the New York Mercantile Exchange early Tuesday. This decline in oil prices weighed on energy stocks with Exxon Mobil (NYSE:XOM) falling by 1.7% and Chevron (NYSE:CVX) losing 1.2%.
Stephen Innes of SPI Asset Management noted that investors were carefully weighing the relationship between economic growth and interest rates, along with potential actions from the Federal Reserve.
The surge in Treasury yields to their highest levels in over a decade has been a key factor affecting the markets. The yield on the 10-year Treasury rose on Monday to 4.67% from 4.58% late Friday, nearing its highest level since 2007. This shift towards bonds, which are paying much more than in the past, has pulled dollars away from stocks and undercut their prices.
High interest rates have also made borrowing more expensive for companies, potentially pressuring their profits. Despite these challenges, the overall U.S. economy has managed to hold up, defying predictions of a recession.
In other news, SmileDirectClub (NASDAQ:SDC)'s stock plunged 61.2% to 16 cents after the company filed for Chapter 11 bankruptcy protection.
In currency markets, the dollar rose to 149.93 Japanese yen from 149.86 yen, while the euro declined to $1.0462 from $1.0480. The rise in U.S. interest rates compared to many other countries has led to an increase in the value of the dollar, as higher interest rates can mean higher yields for investments.
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