TOKYO (Reuters) – Asian stocks slipped on Wednesday, dragged by losses on Wall Street as the technology sector stuttered yet again after a brief rebound, while the dollar sagged on lower long-term U.S. yields.
Weaker copper also checked risk sentiment. Japan’s Nikkei .N225 fell 0.9 percent with non-ferrous metals producers .INFRO.T suffering large losses after copper’s slide overnight to a two-month low. [.T]
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 0.9 percent.
The S&P 500 information technology index .SPLRCT barely rose overnight as it gave up much of the 1.4 percent intraday gains. The year’s top-performing sector was still down nearly 4 percent over the past week, with investors shifting money to banks, retailers and other stocks seen as likely to benefit the most from tax cuts promised by U.S. President Donald Trump. [.N]
“The retreat in U.S. shares coincides with profit taking by investors before they close their books for the year-end. A lot of such year-end window dressing already appears to have taken place in emerging market equities,” said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo.
“The main focal point for emerging market equities is how U.S. yields move towards the year end. The Federal Reserve’s monetary policy stance for next year bears close watching due to its impact on U.S. yields, and in turn the various equity markets.”
Fed funds futures prices showed that investors see a rate increase at the Federal Reserve’s Dec. 12-13 meeting as a done deal with much of the focus now on the outlook for rates in 2018 and beyond.
The two-year Treasury yield US2YT=RR reached a nine-year high overnight, driven by the Fed’s tighter policy path and on expectations the U.S. Congress will pass tax reform legislation.
But the 10-year Treasury yield US10YT=RR fell overnight, flattening the yield curve further. The curve has flattened as investors see limited room for long-term U.S. inflation.
The dollar dipped, weighed by sagging long-term U.S. yields. The dollar index against six major currencies slipped 0.1 percent to 93.287 .DXY.
The pound stood at $1.3422 GBP=D3 for a loss of 0.15 percent, having taken a small knock after Sky News reported of a foiled plot to assassinate British Prime Minister Theresa May.
Sterling had fallen to as low as $1.3370 on Tuesday on disappointment after May failed to clinch a deal to open talks on post-Brexit free trade with the European Union. [GBP/]
Bitcoin continued its relentless advance, climbing to a fresh record high of $12,205.46 on the BitStamp exchange BTC=BTSP.
In commodities, U.S. crude oil futures CLc1 were down 0.45 percent at $57.36 per barrel after American Petroleum Institute data showed that U.S. gasoline stocks and distillate inventories rose more than expected last week. [O/R]
Brent crude LCOc1 lost 0.4 percent to $62.60 per barrel, though it is up by over 40 percent since June, supported by a supply cut led by OPEC and Russia which is expected to last throughout 2018.
Copper on the London Metal Exchange CMCU3 crawled up 0.2 percent to $6,557 per tonne after sliding to a two-month low of $6,507.50 overnight.
Base metals were hit by a combination of the dollar’s rise earlier in the week on U.S. tax reform hopes and a technical sell-off stemming from a rise in inventories. [MET/L]
Reporting by Shinichi Saoshiro; Editing by Shri Navaratnam