ASX, US stocks tumble after US central bank declines to intervene to stem rising bond yields

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ASX, US stocks tumble after US central bank declines to intervene to stem rising bond yields

The Australian share market has followed Wall Street lower after the tech-heavy Nasdaq index wiped out its gains for this year as the US central bank chairman took no steps to calm the market volatility which has pushed up bond yields.

The All Ordinaries fell 1 per cent or 68 points to 6,933 in the first hour of trade.

At 10:20am AEDT, the ASX 200 index was down by nearly 1 per cent to 6,700 with the losses led by miners, industrials and technology stocks.

Oil stocks and banks were among the gainers.

The biggest losers on the benchmark index were Clinuvel Pharmaceuticals (-4.2pc), rare earths miner Lynas (-4.2pc) and buy now, pay later firm Zip (-4pc).

Going up were Westfield shopping centre owner Unibail Rodamco (+6.8pc), and oil and gas firms Santos (+2.9pc) and Oil Search (+2.9pc).

Most of the big banks were lower and big miners Rio Tinto (-1.9pc) and BHP (-2.7pc) were sold off sharply as benchmark iron ore prices fell overnight.

Fed boss stands pat on market intervention

Federal Reserve chairman Jerome Powell, speaking at the Wall Street Journal Jobs Summit, stopped short of offering specific measures to curb the sell-off in bonds and a corresponding rise in the returns on the bonds, known as yields, because of fears of rising inflation.

His comments set aside concern that a recent move up in US Treasury yields might spell trouble for the Fed, as investors push up borrowing costs the central bank wants to keep low.

While Mr Powell said the increase was “notable and caught my attention”, he did not consider it a “disorderly” move, or one that pushed long-term rates so high the Fed might have to intervene in markets more forcefully to bring them down, such as by increasing its $US120 billion ($155 billion) in monthly bond purchases.

And the Federal Reserve chairman reiterated his promise to keep US interest rates near zero and monthly bond-buying intact.

The benchmark 10-year Treasury yield spiked to 1.533 per cent because Mr Powell did not comment on any changes in the Fed’s bond-buying program to tackle the surge in interest rates.

The yield still held below last week’s one-year high of 1.614 per cent.

National Australia Bank head of foreign exchange strategy, Ray Attrill, had his tongue firmly in his cheek in his morning economic note with regards to Mr Powell’s comments.

Mr Attrill said that investors were expecting that the Fed may step up purchases of longer-term bonds known as Operation Twist.

“Instead, while the Fed chair gave a nod to bond market ructions by noting they had ‘caught my attention’, the Fed was in essence holding back and prepared to use their tools only ‘if conditions change materially’,” he said.

Nasdaq nears a correction

Wall Street’s fear gauge, the VIX, reached a high of 31.90 points, the higher the index, the higher the volatility.

The Nasdaq wiped out all of its gains for this year and was down nearly 10 per cent from its record closing high on February 12, almost a technical correction.

The tech-dominated index fell around 2.5 per cent to 12,554 at its lowest during the trading session.

It came off its lows by the end of trade and closed down 2.1 per cent or 274 points to 12,723.

High-end carpet and floor coverings manufacturer, Dixie Group, was the biggest loser, down nearly 41 per cent after it made a small loss for the fourth quarter of $US318,000.

It reported revenue of $US89 million for the quarter.

Biotechnology firm Five Prime Therapeutics jumped nearly 79 per cent after Amgen announced it would buy Five in a deal valued at $US1.9 billion.

Amgen shares fell 0.9 per cent to $US221.91.

The Dow fell more than 500 points during the trading session.

It closed down 346 points to or 1.1 per cent to 30,924.

The Dow has fallen more than 3 per cent from its record closing high on February 24, while the S&P 500 has dropped 5 per cent from its record close on February 12.

The S&P 500 index briefly erased its gains for 2021.

It ended down 1.3 per cent or 51 points to 3,768.

The energy sector touched a one-year high on the back of higher oil prices.

IT giant Apple (-1.6pc), electric car maker Tesla (-4.9pc) and payments firm PayPal (-6.3pc) were among the biggest drags on the S&P 500.

US jobless claims rise more than expected

New data showed the number of Americans filing for jobless benefits rose last week, likely boosted by brutal winter storms in the densely populated south including Texas, though the labour market outlook is improving amid declining new COVID-19 cases.

Other figures showed an improving labour market with job cuts by US-based companies falling by 57 per cent last month.

The latest official US unemployment figures come out tonight.

In Europe, markets were mainly in the red.

The FTSE 100 in London fell 0.4 per cent or 25 points to 6,651, the DAX in Germany lost 0.2 per cent to 14,056, and the CAC 40 in Paris was steady at 5,831.

The Australian dollar slumped by one US cent overnight to around 77.10 US cents, as the greenback was bolstered by higher bond yields.

Oil prices surged after OPEC extended production cuts into April.

West Texas crude jumped 4.8 per cent or $2.96 to $US64.24 a barrel, while Brent crude oil rose 4.9 per cent to $US67.19 a barrel.

Spot gold has continued to tumble and fell below $US1,700 an ounce, down 0.9 per cent to $US1,696.61.

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