TOKYO (Reuters) – Asian equities slumped on Wednesday as US bond yields rose over 3 percent and US companies' warnings of higher costs raised fears that a corporate earnings boom would be close to its peak could.
MSCI's broadest index for Asia-Pacific equities outside Japan .MIAPJ0000PUS fell 0.3 percent, beating its weakest in nearly three weeks, with tech-heavy Taiwan stock. TWII slides at two-month lows on concerns over the slowdown in semiconductor demand. Japan's Nikkei .N225 fell 0.2 percent.
European equities are expected to fall, with Spread-Better taking the British FTSE .FTSE, the German Dax. GDAXI and the French Cac. FCHI dropped by 0.7 to 0.9 per cent.
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Industrial heavyweight Caterpillar ( CAT.N ) outperformed earnings estimates on strong global demand, but its shares slipped 6.2 percent after first-quarter management hit the "high water mark" for the year and warned of rising steel prices.
"We have seen a number of companies announce excessive profits and their shares have fallen sharply," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
Fujito recorded major financial interests such as Goldman Sachs ( GS.N ) and Citigroup ( CN ), as well as the Google parent company Alphabet GOOG.N, the first major technology company to report earnings , have followed a similar pattern.
Corporate earnings are solid, analysts forecast 21.1 percent growth for US S & P 500 companies in the January-March quarter, according to Thomson Reuters. A similar trend is expected worldwide.
(For a graph on global corporate earnings, click on reut.rs/2FeyaIU)
"When stocks fall, when corporate profits rise 20 percent and the economy grows 3 percent, the market is in trouble It feels like we are seeing an end to the long rally since 2009. Investors might think the best time is coming soon, "he said.
Creeping gains in US Treasury yields raise fears that portfolio managers could transfer money to safer fixed income securities at the expense of riskier assets such as equities and emerging markets.
The ten-year return, a measure of global borrowing costs, has been steadily boosted by a combination of worries over inflation, growing debt supply, and rising Federal Reserve borrowing costs.
The 10-year US Treasury yield US10YT = RR rose to 3.009 percent. A break of its January high of 3.041 percent could make investors even bearier.
The Fed Funds Rate Futures <0#FF:> rates have been steadily falling this month and have priced in a sizable chance of three more interest rate hikes by the end of this year.
The impact is already felt in many emerging markets, with the JPMorgan Emerging Markets Bond .JPMEPR hit a two-month low.
In Indonesia, a market with one of the largest exposures to foreign portfolio holdings, the authorities have massively intervened to set a floor below the Rupiah IDR = flirting at two-year lows.
The Indian rupee reached a 13-month low INR = IN.
"Higher yields undoubtedly have a negative impact on emerging markets and we are likely to see outflows from emerging market debt," said Takahiko Sasaki, market economist at Mizuho Bank.
The dollar also gained some value against the major currencies.
The Euro was trading at $ 1,2226, not far from Tuesday's low at $ 1,2182, a lows that last hit March 1st.
The Dollar was JPY 108.87 yen after a 2-1 / 2-month high of 109.20 yen on Tuesday.
The Australian dollar fell 0.4 percent to a four-month low of $ 0.7572 = D4.
Against a basket of major currencies, the dollar index .DXY rose 0.2 percent.
Oil prices were stable, but below the more than three-year highs of the last session, as rising US fuel reserves and production suffered on an otherwise bullish market.
Brent LCOc1 posted $ 73.86 a barrel, little changed on the day. It rose to $ 75.47 on Tuesday, its highest level since November 2014. West Texas Intermediate (WTI) crude oil traded at $ 67.68.
repetition by Hideyuki Sano; Editing by Kim Coghill & Shri Navaratnam