Asian stocks slipped on Wednesday, dragged by losses on Wall Street as the technology sector stuttered yet again after a brief rebound, while the dollar sagged on lower long-term US yields.
Weaker copper also checked risk sentiment. Japan's Nikkei .N225 fell 0.9 per cent with non-ferrous metals producers .INFRO.T suffering large losses after copper's slide overnight to a two-month low.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 0.9 per cent.
Australian stocks shed 0.35 per cent, South Korea's KOSPI .KS11 lost 0.65 per cent and Shanghai .SSEC retreated 0.7 per cent.
The S&P 500 information technology index .SPLRCT barely rose overnight as it gave up much of the 1.4 per cent intraday gains. The year’s top-performing sector was still down nearly 4 per cent over the past week, with investors shifting money to banks, retailers and other stocks seen as likely to benefit the most from tax cuts promised by US President Donald Trump.
That pulled the S&P 500 .SPX down for the third straight session overnight. The Dow .DJI and Nasdaq .IXIC also retreated.
“The retreat in US shares coincides with profit taking by investors before they close their books for the year-end. A lot of such year-end window dressing already appears to have taken place in emerging market equities,” said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo.
“The main focal point for emerging market equities is how US yields move towards the year end. The Federal Reserve’s monetary policy stance for next year bears close watching due to its impact on US yields, and in turn the various equity markets.”
Fed funds futures prices showed that investors see a rate increase at the Federal Reserve’s December 12-13 meeting as a done deal with much of the focus now on the outlook for rates in 2018 and beyond.
The two-year Treasury yield US2YT=RR reached a nine-year high overnight, driven by the Fed’s tighter policy path and on expectations the US Congress will pass tax reform legislation.
But the 10-year Treasury yield US10YT=RR fell overnight, flattening the yield curve further. The curve has flattened as investors see limited room for long-term US inflation.
The dollar dipped, weighed by sagging long-term US yields. The dollar index against six major currencies slipped 0.1 per cent to 93.287 .DXY.
The greenback lost 0.2 per cent to 112.330 yen JPY= and the euro was little changed at $1.1830 EUR= after shedding 0.35 per cent the previous day.
The pound stood at $1.3422 GBP=D3 for a loss of 0.15 per cent, having taken a small knock after Sky News reported of a foiled plot to assassinate British Prime Minister Theresa May.
Sterling had fallen to as low as $1.3370 on Tuesday on disappointment after May failed to clinch a deal to open talks on post-Brexit free trade with the European Union.
Bitcoin continued its relentless advance, climbing to a fresh record high of $12,205.46 on the BitStamp exchange BTC=BTSP.
In commodities, US crude oil futures CLc1 were down 0.45 per cent at $57.36 per barrel after American Petroleum Institute data showed that US gasoline stocks and distillate inventories rose more than expected last week.
Brent crude LCOc1 lost 0.4 per cent to $62.60 per barrel, though it is up by over 40 per cent since June, supported by a supply cut led by OPEC and Russia which is expected to last throughout 2018.
Copper on the London Metal Exchange CMCU3 crawled up 0.2 per cent to $6,557 per tonne after sliding to a two-month low of $6,507.50 overnight.
Base metals were hit by a combination of the dollar’s rise earlier in the week on US tax reform hopes and a technical sell-off stemming from a rise in inventories.