Global bond markets are tense, Asian tech shares get a lift from Alphabet

Sydney — Global bond markets were tense on Tuesday amid talk of central bank tightening and the risk of a robust reading on US economic growth later in the week.

Asian tech stocks drew support from stellar results from internet giant Alphabet.

Shares in Google’s parent climbed 3.6% after hours to hit a record high, valuing the group at $870bn.

That made up for an otherwise dull day on Wall Street, where the Dow Jones industrial average eased 0.06%, while the S&P 500 gained 0.18% and the Nasdaq 0.28%.

In Asia, Shanghai shares seemed to get a boost from news that Beijing would adopt a more “vigorous” fiscal policy, including company tax cuts.

Chinese blue chips rose 1.6% to a one-month high, while MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.47%. Japan’s Nikkei edged up 0.5% even as a disappointing reading on local factory activity suggested the threat of a trade war was starting to bite.

Bond bulls were still smarting from speculation that the Bank of Japan is close to announcing measures to scale back its massive monetary stimulus, a risk that lifted long-term borrowing costs globally.

Markets were worried that Japanese investors would have less incentive to hunt offshore for yield, ANZ economist Felicity Emmett said.

“The 10-basis-point steepening in the Japanese yield curve is massive in the context of a market that rarely moves more than one basis point,” she said.

“It reflects a broader fear that central banks are reducing their purchases while US bond supply is set to rise significantly.”

As a result, 10-year US Treasury yields jumped to their highest in five weeks around 2.96% and were again nearing the psychological 3% bulwark.

GDP guessing games

Part of the shift in yields was because of chatter that data on second-quarter US economic growth (GDP), due on Friday, would easily top current forecasts of 4.1%. Dealers noted some media reports that President Donald Trump himself was predicting an outcome of 4.8%.

That would not be out of bounds given the much-watched Atlanta Fed GDP tracker puts growth at an annualised 4.5%.

Such a strong outcome would only add to the risk of faster rate hikes from the Federal Reserve and underpin the dollar.

Against a basket of currencies, the dollar was hovering at 94.607 compared with a low of 94.207 on Monday. It bought ¥111.22, against Monday’s trough of ¥110.75.

The euro lapsed to $1.1690, having run into profit-taking at a peak of $1.1750 overnight.

China’s yuan went the other way, slipping to a one-year low on the dollar with Beijing saying its value was driven by market forces.

In commodity markets, oil prices eased as the focus turned to oversupply worries and away from escalating tension between the US and Iran.

US crude lost 16c to $67.73, while Brent dipped 23c to $72.83 a barrel.

Spot gold was a fraction lower at $1,222.82.

Reuters