Asian markets sink as rising borrowing costs spook dealers

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Asian markets tumbled on Friday, hit by profit-taking and growing global concerns about a rise in US Treasury yields to four-year highs, while fresh US political turmoil is also causing unease.

Equity traders around the world have been firing on all cylinders in recent months, sending markets to record or multi-year highs, on confidence in the global economy, healthy earnings and optimism over Donald Trump’s tax cuts.

That improvement has also led central banks to temper their crisis-era stimulus measures, which has led to a rise in bond yields, including the key US Treasury market.

The price of the benchmark 10-year Treasury bill is sitting at levels not seen since April 2014, sparked fears that a lift in interest rates will limit economic growth and encourage investors to steer money from equities.

With the Federal Reserve already in the midst of an interest rate rising cycle — it is tipped to hike at least three times this year — there is increasing concern about the impact on world markets.

“The performance of the bond market has got to be beginning to flash red to equities,” Mark Heppenstall, chief investment officer of Penn Mutual Asset Management, told Bloomberg News.

“It seems we’re reaching a critical level on interest rates that could throw some cold water on the party in the equity market.”

Tokyo ended the morning down 1.3 percent and Hong Kong, which in January chalked up a series of records, fell 0.1 percent while Shanghai was off 0.5 percent. Singapore lost 0.6 percent, Seoul dived 1.6 percent and Taipei eased 0.4 percent.

The losses followed a sell-off in the S&P 500 and Nasdaq on Wall Street, though the Dow edged up.

Sydney and Wellington both edged up.

While rising US rates would be expected to boost the dollar, the US unit continues to struggle against its main peers as dealers bet on tighter monetary policy at the European Central Bank and preferable terms for Britain when it leaves the European Union.

The euro got an extra lift Thursday from comments by top ECB officials saying it should begin winding down its massive bond-purchase scheme.

The dollar was also being weighed by reports that the new head of the FBI could resign if Trump approves the release of an explosive secret memo at the centre of a political firestorm in Washington.

Bitcoin is wallowing well below the $9,000 mark after India said it did not consider cryptocurrencies legal tender and will look to eliminate their use as payment systems.

The remarks come after regulators in South Korea, China and Russia recently said they would clamp down on the unit.

The unit is now sitting at around $8,600, less than half its record high value near $20,000 seen in mid-December at the height of a crypto-boom. Some analysts are now predicting it could fall to as low as $6,000.