TOKYO- Asian stocks slumped on Wednesday as a sharp rise in US bond yields unnerved investors ahead of key inflation data that could inform the pace of Federal Reserve policy easing.
Short-term Treasury yields edged up after jumping to the highest since late July on Tuesday as the market reopened after the Veterans Day holiday, spurring the US dollar to a more than three-month peak versus the yen.
Bond yields have soared since Donald Trump was elected back to the White House last week on expectations lower taxes and higher tariffs will increase government borrowing and push up the fiscal deficit. Trump’s proposed policies are also seen by analysts as fueling inflation, potentially impeding the path to lower Fed interest rates.
Those same expectations had propelled US stocks to record highs, but the rally stalled overnight as bond yields soared.
“It all continues to be a part of the Trump trade, which, at its core, is about deeper deficit spending,” said Kyle Rodda, a senior financial markets analyst at Capital.com.
“However, as has proven the case in other market melt-ups, a tug-of-war eventually emerges between stocks and bonds, as higher risk-free rates strangle valuations.”
Bitcoin paused for breath after climbing to an all-time high just below $90,000 in the previous session, with markets betting on Trump to usher in an easier regulatory environment after pledging to make the United States “the crypto capital of the planet”. The token traded at around $87,295.
Commodities were broadly weaker as traders worried about the outlook for key consumer China, which stands to bear the brunt of Trump’s threatened trade tariffs. Stimulus announcements from Beijing so far have failed to stir much optimism over an economic revival.
Hong Kong’s Hang Seng slid more than 1 percent, with a subindex of mainland Chinese property stocks slumping 2.5 percent. Chinese blue chips were slightly lower.
