Asian equities track Wall St sell-off as US deficit fears grow
Investors are increasingly worries about the US fiscal deficit, pushing up the cost of government borrowing
A weak auction of 20-year US government debt flashed a warning sign that the bond market was worried about the country's finances, days after Moody's lowered its top-tier credit rating.
The news brought an end to a healthy run-up in recent weeks that was stoked by the China-US tariff detente and signs of progress between the United States and other countries on trade.
Bond yields spiked across the board as investors demanded more interest for holding government debt, signalling their fears about the world's biggest economy -- 30-year Treasuries hit their highest level since late 2023.
The selling came after the auction of 20-year bonds attracted tepid interest, and brought back memories of the sell-off that followed US President Trump's "Liberation Day" tariff blitz last month, which was followed by the White House taking a less aggressive approach.
All three main indexes on Wall Street ended sharply lower.
A tax bill pushed by Trump that is currently going through Congress pairs an extension of the tax cuts from Trump's first presidential term with steep savings in government spending to pay for them.
But many market watchers do not expect the spending cuts in the package to be sufficient to offset the tax cuts, lifting the deficit.
"The proposed tax cuts are raising concerns from economists about the US's fiscal position and there are signs of anxiety in the bond markets about the country's debt burden," said National Australia Bank's Tapas Strickland.
Trump's first-term Treasury Secretary, Steven Mnuchin, warned that "the budget deficit is a larger concern to me than the trade deficit" and called for more spending cuts.
Asian equities also sank, with Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Taipei, Wellington and Manila all in the red.
The dollar also held losses on growing concerns about the US economy, while the uncertainty helped revive demand for safe-haven gold, which was sitting around $3,340 an ounce.
And there are now fears that stocks could be in for another rough ride.
"These higher long-end yields make it a whole lot harder to justify today's equity valuations," said Stephen Innes at SPI Asset Management.
"Tech and growth names -- already stretched -- are staring down the barrel of a tangible equity to rates market repricing, and this could cap the rally fuel that's been driving risk assets since the April tariff detente."
Still, bitcoin broke a fresh record of $110,707 as US lawmakers showed greater bipartisan support for a cryptocurrency bill on the regulation of so-called stablecoins, digital coins whose value is tied to the dollar.
This has sparked fresh hopes for regulatory clarity in the sector, including for bitcoin, which is not directly linked to the dollar.
Oil prices extended losses after data from the US Energy Information Administration showed the country's stockpiles had risen last week.
The news helped reverse a rally in the commodity on Wednesday that was sparked by a CNN report that Israel was planning a strike on Iranian nuclear sites.
Key figures at around 0230 GMT
Tokyo - Nikkei 225: DOWN 0.9 percent at 36,967.13 (break)
Hong Kong - Hang Seng Index: DOWN 0.4 percent at 23,733.67
Shanghai - Composite: DOWN 0.1 percent at 3,383.87
Euro/dollar: DOWN at $1.1332 from $1.1334 on Wednesday
Pound/dollar: UP at $1.3425 from $1.3421
Dollar/yen: DOWN at 143.36 yen from 143.66 yen
Euro/pound: DOWN at 84.40 pence from 84.42 pence
West Texas Intermediate: DOWN 0.6 percent at $61.21 per barrel
Brent North Sea Crude: DOWN 0.6 percent at $64.54 per barrel
New York - Dow: DOWN 1.9 percent at 41,860.44 (close)
London - FTSE 100: UP 0.1 percent at 8,786.46 (close)
© 2025 AFP
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
France 24
2 hours ago
- France 24
NATO summit opens amid discord over defence spending and Ukraine
U.S. President Donald Trump and his NATO counterparts are due to gather Tuesday for a summit that could unite the world's biggest security organization around a new defense spending pledge or widen divisions among the 32 allies. Just a week ago, things had seemed rosy. NATO Secretary-General Mark Rutte was optimistic the European members and Canada would commit to invest at least as much of their economic growth on defense as the United States does for the first time. Then Spain rejected the new NATO target for each country to spend 5% of its gross domestic product on defense needs, calling it 'unreasonable.' Trump also insists on that figure. The alliance operates on a consensus that requires the backing of all 32 members. The following day, Trump said the U.S. should not have to respect the goal. 'I don't think we should, but I think they should,' he said. Trump lashed out at Prime Minister Pedro Sánchez's government, saying: 'NATO is going to have to deal with Spain. Spain's been a very low payer." He also criticized Canada as 'a low payer.' Spain was the lowest spender in the alliance last year, directing less than 2% of its GDP on defense expenditure, while Canada was spending 1.45%, according to NATO figures. Then Trump ordered the bombing of nuclear installations in Iran. In 2003, the U.S.-led war on Iraq deeply divided NATO, as France and Germany led opposition to the attack, while Britain and Spain joined the coalition. European allies and Canada also want Ukraine to be at the top of the summit agenda, but they are wary that Trump might not want President Volodymyr Zelenskyy to steal the limelight. A short summit, decades of mutual security The two-day summit in The Hague involves an informal dinner Tuesday and one working session Wednesday morning. A very short summit statement has been drafted to ensure the meeting is not derailed by fights over details and wording. Indeed, much about this NATO summit is brief, even though ripples could be felt for years. Founded in 1949, the North Atlantic Treaty Organization was formed by 12 nations to counter the threat to security in Europe posed by the Soviet Union during the Cold War, notably via a strong U.S. presence on the continent. Dealing with Moscow is in its DNA. Keeping the peace outside the Euro-Atlantic area is not. NATO's ranks have grown to 32 countries since the Washington Treaty was signed 75 years ago. Sweden joined last year, worried by an increasingly aggressive Russia. NATO's collective security guarantee — Article 5 of the treaty — underpins its credibility. It's a political commitment by all countries to come to the aid of any member whose sovereignty or territory might be under attack. Trump has suggested he is committed to that pledge, but he has also sowed doubt about his intentions. He has said the U.S. intends to remain a member of the alliance. A civilian runs NATO, but the U.S. and its military hold power The United States is NATO's most powerful member. It spends much more on defense than any other ally and far outweighs its partners in terms of military muscle. Washington has traditionally driven the agenda but has stepped back under Trump. The U.S. nuclear arsenal provides strategic deterrence against would-be adversaries. NATO's day-to-day work is led by Rutte, a former Dutch prime minister . As its top civilian official, he chairs almost weekly meetings of ambassadors in the North Atlantic Council at its Brussels headquarters. He chairs other 'NACs' at ministerial and leader levels. Rutte runs NATO headquarters, trying to foster consensus and to speak on behalf of all members. NATO's military headquarters is based nearby in Mons, Belgium. It is always run by a top U.S. officer. Ukraine's role at the summit is unclear With Trump demanding greater defense spending, it's unclear what role Ukraine will play at the summit. Zelenskyy has been invited, but it's unclear whether he will have a seat at NATO's table, although he may take part in Tuesday's dinner. Russia's war in Ukraine usually dominates such meetings. More broadly, NATO itself is not arming Ukraine. As an organization, it possesses no weapons of any kind. Collectively, it provides only non-lethal support — fuel, combat rations, medical supplies, body armor, and equipment to counter drones or mines. But individually, members do send arms. European allies provided 60% of the military support that Ukraine received in 2024. NATO coordinates those weapons deliveries via a hub on the Polish border and helps organize training for Ukrainian troops. NATO's troop plans A key part of the commitment for allies to defend one another is to deter Russia, or any other adversary, from attacking in the first place. Finland and Sweden joined NATO recently because of this concern. Under NATO's new military plans, 300,000 military personnel would be deployed within 30 days to counter any attack, whether it be on land, at sea, by air or in cyberspace. But experts doubt whether the allies could muster the troop numbers. It's not just about troop and equipment numbers. An adversary would be less likely to challenge NATO if it thought the allies would use the forces it controls. Trump's threats against U.S. allies — including imposing tariffs on them — has weakened that deterrence. The U.S. is carrying the biggest military burden Due to high U.S. defense spending over many years, the American armed forces have more personnel and superior weapons but also significant transportation and logistics assets. Other allies are starting to spend more, though. After years of cuts, NATO members committed to ramp up their national defense budgets in 2014 when Russia illegally annexed Ukraine's Crimean Peninsula. After Russia's full-scale invasion of Ukraine in 2022, the NATO allies agreed to make 2% of GDP the minimum spending level. Last year, 22 countries were expected to hit that target, up from only three a decade ago. In The Hague, the allies were expected to up the ante to 3.5%, plus a further 1.5% for things like improving roads, bridges, ports and airfields or preparing societies to deal with future conflicts. Whether they will now remains an open question.
France 24
3 hours ago
- France 24
Asian stocks up as Trump announces Iran-Israel ceasefire
Investors were relieved that Iran did not retaliate to a US attack on its nuclear facilities by throttling oil transport through the strategic Strait of Hormuz. On Monday, Iran said it had launched missiles at a major US base in Qatar, which described the situation as stable, while analysts said oilfield assets were unaffected. "Tehran played it cool. Their 'retaliation' hit a US base in Qatar -- loud enough for headlines, quiet enough not to shake the oil market's foundations," said Stephen Innes at SPI Asset Management. "And once that became clear, the war premium came crashing out of crude," with Brent and the main US crude contract WTI sliding more than seven percent overnight. Both oil contracts were down over two percent on Tuesday. In Asia, the mood was largely upbeat, with Tokyo and Hong Kong up 1.4 percent, Shanghai gaining 0.8 percent and Seoul jumping 2.7 percent. Singapore gained 0.7 percent, Sydney was up 1.1 percent and Taipei put on 1.8 percent, but Jakarta was down 1.7 percent. Trump said Iran and Israel had agreed to a staggered ceasefire that would bring about an "official end" to their conflict, as strikes continued to hammer Tehran. Iran's foreign minister said Tuesday that Tehran did not intend to continue its strikes if Israel stopped its attacks. "Details of the ceasefire agreement are still sparse at the time of writing and as such the detente and de-escalation is not a done deal," wrote Michael Wan at MUFG. "Nonetheless, latest news reports suggest Iran has agreed to the ceasefire and if this is right, the left tail risk of more extreme scenarios resulting in significant oil supply disruptions have meaningfully diminished." In forex markets, the dollar gave up gains after Federal Reserve Governor Michelle Bowman said she would support cutting interest rates at July's meeting if inflation holds steady. The market currently expects the Fed to resume cutting interest rates in September. Bowman indicated that "ongoing progress in tariff negotiations providing a less risky economic environment to adjust policy"," prompting the dollar to weaken, Wan said. Key figures at around 0200 GMT Tokyo - Nikkei 225: UP 1.4 percent at 38,873.07 Hong Kong - Hang Seng Index: UP 1.4 percent at 24,025.13 Shanghai - Composite: UP 0.8 percent at 3,886.66 Euro/dollar: UP at $1.1590 from $1.1581 on Monday Pound/dollar: UP at $1.3539 from $1.3526 Dollar/yen: DOWN at 145.66 yen from 146.12 yen Euro/pound: FLAT at 85.60 pence West Texas Intermediate: DOWN 2.3 percent at $66.19 per barrel Brent North Sea Crude: DOWN 2.2 percent at $69.24 per barrel New York - Dow: UP 0.9 percent at 42,581.78 (close)
France 24
3 hours ago
- France 24
Virgin Australia surges in market comeback
A 30-percent chunk of Virgin Australia, one of the few domestic rivals to Qantas, was sold in an initial public offering this month at Aus$2.90 a share to raise Aus$685 million (US$444 million). The price values the entire airline at Aus$2.3 billion. The stock, which listed on the Australian Securities Exchange at noon, climbed 8.6 percent from the offer price in the first five minutes of trade. US private equity giant Bain Capital came to the airline's rescue in late 2020 after the Australian government refused to bail it out as the Covid-19 pandemic brought international travel to a standstill. "Today marks the start of an exciting new chapter for Virgin Australia as a publicly listed company," said airline chairman Peter Warne. "Our listing reflects the remarkable work undertaken over the past five years to transform the airline and position it for long-term success," he said in a statement. After selling a 30-percent stake in Virgin Australia in the initial public offering, Bain now holds about 40 percent of the airline. Qatar Airways bought a 25 percent share in the carrier this year. Qatar's entry injected a dose of foreign competition against Australia's dominant carrier Qantas and its budget offshoot Jetstar, which together carry more than 60 percent of domestic passengers. "We are proud of how far we have come and energised by the opportunities ahead as we continue to realise our ambition of being Australia's most loved airline," Virgin Australia chief executive Dave Emerson said.
