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Japan, South Korea markets drop 2% following overnight Wall Street plunge amid rising bond yields

SINGAPORE — Stocks in Asia-Pacific fell sharply in Friday morning trade following an overnight drop on Wall Street as a rapid rise in bond yields rattled investor sentiment.

In Japan, the Nikkei 225 fell 2.25% while the Topix index slipped 1.79%. South Korea’s Kospi dropped 2.22%.

Australia’s S&P/ASX 200 fell 2.37% in morning trade.

MSCI’s broadest index of Asia-Pacific shares outside Japan traded 1.08% lower.

Bond yields watched

Investors monitored bond yields during Friday’s session. Overnight, the yield on the benchmark 10-year U.S. Treasury note briefly crossed the 1.6% level to trade at its highest level in more than a year.

“Yields are rising because investors are optimistic. They believe a strong sustainable recovery is right around the corner and prices will rise as demand comes roaring back.,” Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, wrote in a note dated Thursday.

Investor optimism about the economic outlook has risen recently on the back of factors such as positive vaccine developments as multiple major economies inoculate their populations.

“In this type of environment, bond yields should be higher regardless of whether the Fed raises interest rates,” Lien said.

The yield on the 10-year was last at 1.5563%, while the yield on the 30-year Treasury bond sat at 2.3311%. Yields move inversely to prices.

Investors also kept an eye on technology stocks in Asia-Pacific after the tech-heavy Nasdaq Composite dropped 3.52% overnight on Wall Street to close at 13,119.43 — its biggest sell-off since Oct. 28.

Japanese conglomerate SoftBank Group saw its shares plunge 3.87% in Friday morning trade. In South Korea, shares of industry heavyweight Samsung Electronics fell nearly 3%.

The Dow Jones Industrial Average also fell 559.85 points to finish its trading day at 31,402.01 while the S&P 500 declined 2.45% to close at 3,829.34.

Currencies

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 90.134 after it rose earlier from below the 90 level.

The Japanese yen traded at 106.38 per dollar, having weakened from levels below 105.6 against the greenback seen earlier this week. The Australian dollar changed hands at $0.7864, off levels above $0.792 seen earlier in the week.

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