Asian shares drop after US selloff, treasuries dip
Asian shares
fell and Treasuries continued their slide at the open Thursday following losses in Wall Street on concerns about the US's
ballooning deficit
.
A regional stock gauge dropped for the first time in three days on weaker openings in Australia, Japan and South Korea. The dollar edged down for a fourth consecutive session. US equity-index futures were steady after the S&P 500 index closed down 1.6% on Wednesday, its sharpest slide in a month.
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Treasuries fell across the curve Wednesday with long-term debt bearing the brunt as the 30-year yield rose 12 basis points. Tepid demand for a $16 billion sale of 20-year bonds rekindled fears over
US government borrowing
and budget deficit. That sapped sentiment after a sharp rebound in risk assets over the past month and revealed structural concerns in the bond market.
'The soft 20-year auction fueled additional weakness,' said Michael O'Rourke, chief market strategist at JonesTrading. 'It has been a theme all week starting with the Moody's downgrade. Additionally, there is the deficit/budget debate being fought in the background of this environment.'
In Asia, investors will be monitoring the Korean won after the currency jumped to a six-month high. Local media had reported that the US believes a relatively weak won is a fundamental cause of South Korea's trade surplus. The currency weakened 0.4% in early Asian trade.
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Elsewhere, Baidu Inc. posted a surprise rise in revenue after the Chinese internet search leader fended off intensifying competition in AI and benefited from demand for computing in the post-DeepSeek Chinese AI development boom.
Traders have been piling into bets that long-term bond yields would surge on concerns over the US's swelling debt and deficits, with Moody's Ratings on Friday lowering the nation's credit score below the top triple-A level. For many, the message was: Unless America gets its finances in order, the perceived risks of lending to the government will rise.
The White House ramped up the pressure on Republicans on Wednesday urging lawmakers to quickly approve President Donald Trump's signature tax bill, adding that a failure to do so would be the 'ultimate betrayal.'
Former Treasury Secretary Steven Mnuchin said he's more alarmed by the country's growing budget deficit than its trade imbalances, and urged Washington to prioritize fiscal repair. 'The budget deficit is a larger concern to me than the trade deficit,' he said during a panel discussion at the Qatar Economic Forum on Wednesday. 'I hope we do get more spending cuts.'
The murky economic outlook has fueled hedging activity in Treasury options, with investors targeting higher rates on longer-dated bonds by the end of the year. Those wagers echo sentiment on Wall Street, where strategists from Goldman Sachs Group Inc. to JPMorgan Chase & Co. are lifting their forecasts for yields.
'These higher yields make it much tougher to justify today's very high valuation levels,' said Matt Maley at Miller Tabak. 'So, it's something that will likely create some renewed headwinds for stocks.'
In commodities, gold rose for a fourth session Thursday. Oil extended its drop as higher US crude stockpiles reinforced worries about an oversupplied market, with geopolitical concerns also in focus.
Bitcoin hit an all-time high.
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