SHANGHAI- Asian share markets broke a five-day slide to edge higher on Thursday, shrugging off drops in Europe and on Wall Street overnight as China underscored its diverging monetary and economic picture by cutting benchmark mortgage rates.
Despite the steadier start in Asia, analysts at ING said geo-political risks, notably the possibility of Russia invading Ukraine, could continue to weigh on global shares, adding to existing pressure from the rising rates outlook.
“Markets may soon start to take into account a greater risk of a conflict flare-up between Russia and Ukraine, which is one reason why stocks may continue to sell and why Treasury yields aren’t on a one-way ticket higher.”
US President Joe Biden predicted on Wednesday that Russia will make a move on Ukraine, saying a full-scale invasion would be “a disaster for Russia” but suggesting there could be a lower cost for a “minor incursion.”
Expectations that the US Federal Reserve will move more quickly to hike interest rates to combat inflation hit technology shares particularly hard overnight, pushing the Nasdaq down more than 1 percent into correction territory.
The sell-off hit bonds as well, pushing US Treasury yields to two-year highs on Wednesday, and taking Germany’s 10-year yield into positive territory for the first time since May 2019 as investors bet policymakers will curb years of stimulus in order to fight rising inflation exacerbated by supply chain disruption.
“There comes a point when you’ve offloaded, you might want to stop offloading. If bonds start to rally a little bit, and you saw yields ease off yesterday in the US, it kind of feels like … we might actually not get a follow-through today,” said Matt Simpson, senior market analyst at City Index in Sydney. – Reuters
