Asia shares fall as US yields hit one-year high
Asian stocks came under pressure on Friday as investor enthusiasm for tech stocks gave way to inflation fears that have sent Treasury yields to one-year highs and growing bets on a U.S. interest rate hike this year.
Oil prices continued to rise after no progress was made on opening the Strait of Hormuz and US President Donald Trump said that China wanted to buy US oil.
Attacks on one ship and the seizure of another raised concerns about energy resources; Brent crude oil futures are up 5.7 per cent this week to US$107 ($A148) per barrel.
All eyes are on Beijing, where Trump will wrap up his two-day official visit on Friday. Trump’s circle includes Tesla CEO Elon Musk and Jensen Huang, chief executive of chip maker Nvidia.
Nvidia gained 4.4 percent overnight after the United States cleared the sale of the company’s H200 chips to Chinese firms, sending the S&P 500 and Nasdaq to new records.
But the enthusiasm did not spread to Asia. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.2 percent on Friday, erasing gains made so far this week.
Japan’s Nikkei index also fell 1.2 percent, with data showing the country’s wholesale inflation rose to 4.9 percent in April, the fastest pace in three years, leaving the Bank of Japan on track to raise interest rates.
South Korea’s KOSPI index rose above 8,000 points for the first time, but entered profit-taking and last fell by 3.0 percent. China’s blue-chip index fell 1.0 percent, while Hong Kong’s Hang Seng index fell 0.9 percent.
“President Trump’s visit to China is ongoing and provides a welcome respite from anxiety about war in Iran. But that’s what we’ll come right back to,” said Padhraic Garvey, head of regional research for the Americas at ING.
“The issue front and center is inflation, which continues to be troubling from a Treasury market perspective. We remain focused on an upside test for yields in the coming weeks.”
Rising inflation risks caused by the rise in oil prices are weighing on investors’ appetite for US Treasuries; Soft auctions this week covering three-year bonds, 10-year bonds and 30-year bonds underscore the market’s fragility.
The latest 30-year bond sale ended at 5.046 percent, the highest yield for that maturity since August 2007. High yields attracted some buyers on Thursday, but 30-year Treasury yields rose again on Friday, rising five basis points to 5.06 percent, the highest since July 2025.
While the long end of the Treasury curve grabs the headlines, borrowing costs at the short end are also rising. The yield on US two-year bonds increased by six basis points on Friday to 4.056 percent, its highest level since May 2025, while the yield on 10-year bonds increased by six basis points to 4.518 percent.
The dollar was set to rise 1.2 percent on the week, the highest gain in two months, boosted by a lack of progress in the Gulf. Solid U.S. retail sales data also showed markets pricing in a 45 percent chance that the Fed will have to raise rates in 2026, even under Kevin Warsh’s new leadership.
The dollar’s strength has pushed the yen to the weak side of 158 per dollar, keeping investors alert to further interventions from Tokyo.
Sterling fell 0.9 per cent in the previous session to a one-month low of US$1.3385 ($A1.8534) following the resignation of UK health minister Wes Streeting, deepening the political crisis there.
