Asia stocks struggle for momentum after US tech sell-off

Shares across the Asia-Pacific region struggled for direction after a rough day on Wall Street, where US technology stocks tumbled in the face of rising inflation expectations.

South Korea’s tech-focused Kospi index fell 0.5 per cent in early trading on Tuesday while Hong Kong’s Hang Seng index rose 0.3 per cent. Japan’s market was closed for a national holiday.

China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks climbed 0.2 per cent a day after the benchmark suffered its biggest one-day drop in more than six months. The sell-off was prompted by concerns that the country’s rapid economic recovery from the Covid-19 pandemic could bring on the removal of policy support for asset prices.

In US trading on Monday, the S&P 500 shed 0.8 per cent while the tech-focused Nasdaq Composite tumbled 2.5 per cent. Shares of Facebook, Amazon, Apple, Netflix and Google parent Alphabet all fell in what some investors suggested was the beginning of an overdue correction.

Futures for the S&P 500 rose 0.3 per cent on Tuesday during Asian trading, while those for London’s FTSE 100 added 0.1 per cent.

A sell-off of US government bonds gathered pace on Monday on fears that returns would be eroded by a return of inflation. The 10-year US Treasury yield rose 0.03 percentage points to 1.37 per cent. Bond yields move inversely to prices.

Trading in US treasuries will not resume until European markets reopen, given the public holiday in Japan.

Investors are also looking ahead to Federal Reserve chair Jay Powell’s testimony to Congressional committees on Wednesday for any hints on whether rising inflation could push the US central bank to curtail its ultra-loose monetary policy.

Traders will get another clue on whether inflation concerns are justified on Friday, when the US commerce department releases its personal consumption expenditures price index for January.

“The reality today is that inflation is a risk — core government bond yields are rising as markets reprice for better future growth”, said Kerry Craig, a global market strategist at JPMorgan Asset Management. “But some inflation may not be a bad thing, and the recovery has a long way to go before it becomes a problem.”

Oil prices continued to rise with Brent crude, the global benchmark, up 1.5 per cent to $66.24 a barrel. US marker West Texas Intermediate rose 1.4 per cent to $62.59 a barrel.