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Japan's Nikkei dips as US yield spike sends Asian markets lower

Tech stocks tumble while COVID emergency extension deals Tokyo market added blow

People walk past an electronic board showing the Nikkei stock index outside a brokerage in Tokyo. Rising U.S. bond yields are weighing on Asian stocks. (Photo by Kei Higuchi)

TOKYO - Japan's equity benchmark fell 2% on Thursday as investors continued to fret over rising U.S. Treasury yields, while other Asian stock markets also retreated.

The Nikkei Stock Average at one point dropped over 800 points, or 2.8%, before closing down more than 600 points to below the 29,000 mark, while the broader Topix index declined 1%. The information and technology sector, as well as companies in the retail and service industries took the brunt of the reaction.

Japan's startup-heavy Mothers index of emerging companies dropped 2% as investors rushed to dump high valuation growth stocks, which are sensitive to rising yields as it reduces their intrinsic value.

Shares in SoftBank Group fell 5% while Sony was down over 2%. Stocks with high price-to-earnings ratios, such as digital advertising company CyberAgent and online medical platform M3, also fell, while SoftBank Group affiliate Z Holdings -- which just completed its merger with popular messaging app Line on Monday -- sunk 4%.

The sell-off in Tokyo followed a decline in U.S. stocks, especially the tech-heavy Nasdaq, which tumbled 2.7% on Wednesday as the yield on the benchmark 10-year bond climbed to near 1.5%.

Fears over the rapid and continued rise of U.S. Treasury yields rippled across Asian stocks markets on Thursday.

Mainland China's stock index, the Shanghai Composite, fell around 2%, while Hong Kong's Hang Seng index sank over 2% as Alibaba Group Holdings' stock price declined around 2% and Tencent Holdings was down 4%.

In South Korea, the Kospi index was down 1%, dragged by a decline in Samsung Electronics shares, which dropped over 1%, as well as SK Hynix, whose stock price dipped about 3%.

Benchmarks in Taiwan, Australia and Indonesia also tumbled.

Japan's stock market also faced the impact of Prime Minister Yoshihide Suga's comments on Wednesday that it will be necessary to extend the COVID-19 state of emergency by two more weeks for the greater Tokyo metropolitan area. Shares in travel-related companies, restaurants and retailers fell sharply on Thursday.

Uniqlo operator Fast Retailing's shares declined over 5%, while department store operators also saw their stock prices fall. Shares in airlines, including ANA Holdings and Japan Airlines, dropped close to 2%.

Earlier this week, Federal Reserve Gov. Lael Brainard acknowledged the rapid rise in bond yields and sought to reassure investors that the central bank was monitoring the situation closely: "I would be concerned if I saw disorderly conditions or persistent tightening and financial conditions that could slow progress towards our goal."

Investors hoping for more guidance will be watching for any comments from Federal Reserve Chair Jerome Powell when he attends a virtual jobs summit hosted by the Wall Street Journal on Thursday.

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