By Alun John

HONG KONG (Reuters] – Asian stocks dropped on Wednesday in the wake of a mixed Wall Street session. The higher U.S. Treasury Yields weighed on tech firms globally and pushed dollars to a five year high against Japan’s yen.

U.S. yields rose Tuesday, as bond investors prepared for Federal Reserve interest rate increases by mid-year in an effort to reduce stubbornly high inflation.[US/]

The MSCI Asia-Pacific share index outside Japan, which is the broadest, lost 0.8%. It was not much changed.

U.S. stock options also dropped with an increase of 0.2% and Nasdaq electronic minis falling by 0.4%

According to Rob Carnell of ING’s Asia Pacific research, “It’s a little more risky from Asia’s point of view because it’s one those days when higher bond yields can be a problem as they tend not to support the dollar instead of local currencies.”

Carnell stated, “But it is pretty choppy. Tomorrow we might get to think the higher yields reflect stronger global background.”

Given the importance of technology stocks within the region, he said that overnight losses in the Nasdaq would be a result of higher yields.

Tech stocks listed in Hong Kong suffered a 3.7% loss in early trading, while Nintendo lost 1% in Japan and Samsung (KS.) fell 2% before its quarter-end results.

U.S. stocks were mixed Tuesday, with tech-heavy Nasdaq dropping 1.3%. However rising yields helped banks and industrial name to reach a record close high and to hit an intraday all-time high. [.N]

U.S. five year notes which are indicative of rate hike expectations rose to their highest levels since February 2020. U.S. two years note yields hit their highest level since March 2020.

The benchmark U.S. 10-year Treasury yields reached a six week high Tuesday, and last stood at 1.657%. [US/]

Minutes from December’s Fed meeting will be released at 1900 GMT. This could show that U.S. policymakers are more sensitive to inflation than ever and ready to tighten their policy.

Edison Pun, senior market analyst for Saxo Markets in Hong Kong, stated that the market speculates on a possible March rate increase when the Fed ceases purchasing assets. Therefore yields are rising.

According to him, he believes that tech stock declines will be temporary and rising yields will help bank stocks.

HSBC shares listed in Hong Kong rose 2.3% Wednesday. However, Huarong, a Chinese manager of bad debts, lost 40% when trading resumed after a suspension.

On currency markets, the Japanese yen stood at 116.7 for $1 after falling to as low as116.34 overnight. It was their lowest point since March 2017.

The Bank of Japan is widely anticipated to be late, if not the last, in raising rates. This gap has been affecting the yen. [FRX/]

With the European Central Bank likely to slow down rate increases, the euro also was on the lower end. The which compares the greenback to six peers was therefore at 96.272. This is the strongest end of the recent range.

On Wednesday, oil prices fell slightly after losing some gains from the previous session. Oil futures dropped 0.3% to $79.73 per barrel, after reaching an all-time high of $80.26, while U.S. West Texas Intermediate crude oil futures declined 0.3% to $76.75 per barrel.[O/R]

The price was $1,814 an troy ounce. This is steady for the day, and the highest point in its current range.