By Alun John

HONG KONG (Reuters) – Asian shares lost ground on Wednesday, tracking declines on Wall Street as investors fretted over economic uncertainties that caused a spike in U.S. benchmark bond yields and pushed the dollar to a more than 10-month high.

There are growing doubts about the recovery in the world at the moment when the U.S. Federal Reserve will taper its stimulus, and the Biden Administration remains stuck in debt ceiling negotiations which could result to a government shutdown.

Benchmark 10-year rates have gained 25 basis points in five sessions and were last at 1.5513%, having hit their highest since mid-June the day before, while the was at 93.752.

Standard Chartered senior cross-asset strategist Daniel Lam said, “We believe (10-year treasury Yields) are likely around 1.5% or 1.75% so they obviously still need to go.”

Lam explained that the increase in yields is due to the United States’ almost certain decision to end its huge asset purchases before the end of the year. He also said that this will drive a shift towards growth stocks and value names.

As policy decisions are less favorable in Asia than in the United States or Europe, this would not reverse flows to U.S. equity from Asia. According to Lam, these opportunities in Asia will only be temporary and infrequent.

Asian shares were hurt by higher yields in the early trades due to weak dollar. MSCI’s Asia-Pacific broadest index fell by 1.43%, with Australia falling 1.5% and South Korea dropping 2.06%.

Hong Kong’s benchmark fell 1.2%, while Chinese blue chips dropped 1.1%.

The general mood in the country, which saw the ruling party vote for a new leader to become its next prime minister before the forthcoming general elections that are due within weeks, caused a drop of 2.3%.

All three U.S. major stock indexes fell nearly 2% overnight, with tech-adjacent and interest rate sensitive stocks being the worst affected by surging yields.

Although it was the Nasdaq’s worst one-day drop since May and the Dow’s greatest since March, U.S. Stock Futures (the ) were only 0.2% higher in Asian hours. ()

Also on traders’ minds was cash-strapped China Evergrande Group, whose shares rose as much as 12% after it said it plans to sell a 9.99 billion yuan ($1.5 billion) stake it owns in Shengjing Bank Co Ltd.

Evergrande is due to make a $47.5 million bond interest payment on its 9.5% March 2024 dollar bond, having missed a similar payment last week, but it said in the stock exchange filing the proceeds of the sale should be used to settle its financial liabilities due to Shengjing Bank.

On currency markets, the dollar was strong, causing the yen and euro to trade near their lowest levels since early 2020.

The day before, oil prices had reached a nearly three-year peak. fell 0.83% to $78.25 per barrel dipped 1.09% to $74.47 a barrel. [O/R]

Spot gold prices rose 0.1% to $1.735.6 an ounce. They also fell 1.09% at $74.47 per barrel. The higher yields caused lower demand for non-interest bearing assets.