Asian stocks step back from record highs on rising bond yields, weak US data

SYDNEY: Asian stocks pulled back from all-time peaks on Friday as higher longer-dated bond yields and underwhelming U.S. data dented investor confidence in a faster economic recovery from the COVID-19 pandemic, while gold hit a seven-month trough.

MSCI's broadest index of Asia Pacific shares outside of Japan was last down 0.1per cent at 733.67 from a record high of 745.89 touched on Thursday.

The index is on track for a small weekly loss after two consecutive weeks of gains.

Since the start of the year, the index has surged nearly 10.5per cent largely led by easy monetary and fiscal policies around the world.

On Friday, Australia's benchmark S&P/ASX 200 index was down 0.8per cent while Japan's Nikkei fell 0.4per cent.

Chinese shares started in the red with the blue-chip CSI300 off 0.6per cent.

"The recent move up in longer dated core yields appears to be weighing on equity investors' mind," said Rodrigo Catril, forex strategist at National Australia Bank.

Core bond yields have pushed higher globally led by the so-called "reflation trade" where investors wager on a pick-up in growth and inflation. Successful coronavirus vaccine roll-outs so far and hopes of massive fiscal spending under U.S. President Joe Biden have spurred reflation trades.

Germany’s 10-year yield on Thursday posted its highest close since June, British 10-year yields traded at a 10-month top of 0.65per cent and U.S. Treasury yields are hovering near one-year highs around 1.3per cent, a large factor supporting the U.S. dollar.

Rising bond yields hurt the appeal of gold, with spot prices hitting a seven-month low of US$1,766 an ounce on Friday.

While rising yields weighed on investor sentiment, "disappointing U.S. jobless figures didn't help the cause either," Catril added.

An unexpected increase in the number of Americans seeking jobless benefits hung heavy on outlook. The Labor Department reported initial unemployment claims rose by 13,000 to 861,000, injecting skepticism about how quickly the U.S. economy could rebound from the global pandemic.

Further, U.S. housing starts fell 6.0per cent in January, the first decline in five months.

On Wall Street, the Dow fell 0.38per cent, the S&P 500 lost 0.44per cent, and the Nasdaq Composite 0.72per cent.

In currencies, the dollar was steady with its index at 90.568.

The British pound hit its highest in over three years at US$1.3965 led by the country's successful vaccine roll-out where 16.5 million people have already been innoculated. It is on track for a sixth straight weekly rise.

The euro is poised for a small weekly loss. The single currency was last at US$1.2085.

The risk sensitive Australian dollar was on track for a third straight weekly rise, last trading at US$0.7762.

In commodities, oil markets saw some profit-taking following days of gains that were driven by a deep freeze across Texas that weighed on production.

Brent crude fell US$1.17 to settle at US$62.76 a barrel. U.S. West Texas Intermediate (WTI) crude futures slipped US$1.37 to US$59.15 a barrel.

Copper surged nearly 3per cent to its highest since April 2012 on Thursday led by demand from Chinese investors who returned from a week-long holiday.

(Reporting by Swati Pandey in Sydney; Additional reporting by Pete Schroeder in Washington; Editing by Sam Holmes and Ana Nicolaci da Costa)