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Morning Bid: Seeking shield from rising yield


By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets.

Consumer confidence surveys from Japan and Australia and Taiwan’s latest inflation print top the Asia-Pacific calendar on Tuesday, with risk appetite more broadly managing to hold up in the face of U.S. Treasury yields breaking out to new 2024 highs.

The 10-year U.S. Treasury yield on Monday rose to 4.464%, the highest since November, yet Wall Street avoided losses and the three major indices ended the day flat.

Benchmark Asian, emerging market and world equity indices all made modest gains on Monday too despite the rise in global yields. The 10-year U.S. yield is up 11 bps since Friday’s U.S. jobs report, yet equity markets have held the line.

It is yet further evidence that investors may be getting used to higher yields and the ever-decreasing amount of rate cuts the Fed is seen delivering this year. A June rate cut is now only a 50-50 probability, and barely 60 bps of easing is expected this year, futures markets show.

Figures on Tuesday are expected to show that annual inflation in Taiwan cooled last month to 2.51% from 3.08% in February. This would mark a notable cooling, but inflation would still be comfortably above the central bank’s 2% target.

The rise in February of almost 1.3 percentage points was the biggest in three years. Taiwan’s central bank followed that with a surprise interest rate rise last month.

Shares in Taiwanese chipmaker TSMC, meanwhile, could get a boost on Tuesday after the U.S. Commerce Department said it would award the firm’s U.S. unit a $6.6 billion subsidy for advanced semiconductor production in Phoenix, Arizona, and up to $5 billion in low-cost government loans.

The same goes for shares in Samsung (KS:005930). The Biden administration plans to award $6-7 billion to the South Korean tech giant as it seeks to ramp up chipmaking in the U.S., two people familiar with the matter said.

Chinese stocks, meanwhile, have bucked the wider trend. They started the week with a third consecutive daily decline, with the troubled property sector once again front and center of investors’ concerns.

Developer Shimao Group said on Monday that China Construction Bank (OTC:CICHF) (Asia) had filed a liquidation petition against it in Hong Kong over unpaid debts, a rare case of a state-owned bank taking such legal action.

The petition centers on Shimao’s failure to repay loans of just over $200 million, and contrasts with legal processes against rival firms China Evergrande (HK:3333) Group and Country Garden for defaulting on their debts that were launched by overseas-based creditors.

China’s currency remains under scrutiny too. The onshore yuan is around its weakest level in five months and close to the upper limit of the central bank’s daily trading band, while the offshore yuan is still trading above the band’s ‘ceiling’.

Here are key developments that could provide more direction to markets on Tuesday:

– Taiwan inflation (March)

– Japan consumer confidence (March)

– Australia consumer confidence (April)

(By Jamie McGeever)

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