BANGKOK (AP) – Asian stocks fell sharply on Tuesday following weakness on Wall Street as rising yields in the U.S. bond market put pressure on stocks.
The Shanghai Composite Index fell 1.7% to 3,007.07, even though the Chinese government reported that the economy grew at an astonishing annual rate of 5.3% in the first quarter of this year. On a quarterly basis, it expanded at a pace of 1.6%.
Hong Kong’s Hang Seng fell 2.1% to $16,248.97.
The Nikkei Stock Average in Tokyo fell 1.9% to 38,471.20 yen as the dollar continued to rise against the yen, hitting a 34-year high. By late afternoon, the dollar was trading at 154.41 yen, up from 154.27 yen.
The euro fell from $1.0626 to $1.0621.
Elsewhere in Asia, Taiwan’s Taiex led the region’s declines, falling 2.7%. Markets in Bangkok were closed for the Songkran holiday.
In South Korea, the Kospi fell 2.3% to 2,609.63, while Australia’s S&P/ASX200 index fell 1.8% to 7,612.50.
On Monday, the S&P 500 fell 1.2% to 5,061.82, its worst decline since October, following last week’s 1.6% decline. The Dow Jones Industrial Average fell 0.7% to $37,735.11, and the Nasdaq Composite Index fell 1.8% to $15,885.02.
Stocks had been rising steadily earlier in the day as oil prices fell on hopes that international efforts to calm escalating tensions in the Middle East could help. However, U.S. Treasury yields also rose sharply following the latest report on the U.S. economy, exceeding expectations.
The economy and financial markets are in a troubling moment, and while the strength is raising hopes for higher corporate profits, it is also hurting prospects for the Federal Reserve to ease interest rates.
Traders are hoping for lower interest rates that could boost the broader economy, and much of the recent rally in the U.S. stock market to record highs has been based on expectations for lower interest rates.
But strong reports like Monday that showed U.S. shoppers increased their spending at retail stores more than expected last month, according to data from CME Group, led traders to believe there could be one or two rate cuts this year. Most expect it to remain at . This was lower than the forecast for more than half a dozen rate cuts at the beginning of the year. Some traders are bracing for the possibility of no rate cut as inflation and the broader economy have stubbornly outperformed expectations this year.
High interest rates and bond yields negatively impact the price of all types of investments, especially those that appear expensive or that compete for the same type of investors as bonds.
Even more impactful was the weakness in big tech stocks. Apple fell 2.2%, Nvidia fell 2.5% and Microsoft fell 2%. They have historically benefited from low interest rates, so they often feel pressured when yields rise. These are also the biggest stocks on Wall Street, so their movements have a special impact on the S&P 500 and other indexes.
Microsoft, for example, rose 1.2% in the early going before falling by the afternoon, making it the second biggest force weighing on the S&P 500.
Some financial companies that reported strong earnings at the beginning of the year helped limit losses. With interest rates unlikely to be supportive in the short term, companies are under widespread pressure to make profits.
In the oil market, a barrel of US crude oil due in May fell 10 cents to $85.31 per barrel in electronic trading on the New York Mercantile Exchange. It fell 25 cents to $85.41 on Monday as political leaders urged Israel not to retaliate following Saturday’s attack by Iran with hundreds of drones, ballistic missiles and cruise missiles.
Brent crude oil, the international standard, fell 8 cents to $90.02 per barrel. It fell 35 cents on Monday to $90.10 a barrel.
This year’s soaring oil prices have raised concerns about the ripple effect on persistently high inflation. After cooling firmly last year, inflation has consistently exceeded expectations every month through 2024.
