Asia Pacific Markets, US Bond Yields, Australia, Japan, Korea

Shares listed in Seoul traded generally higher during Thursday afternoon’s session, bucking the trend in the broader Asia-Pacific region.

Investors further processed Wednesday’s economic data, which showed the country posted a narrowed trade deficit as markets closed to celebrate Independence Day, as well as China’s surprise jump in its purchasing managers’ index data.

The steel and metals industry gained more than 4.4%, while the chemical industry was up 3.6%.

Hyundai Steel rose 6.43%, Posco Holdings gained almost 6% and Lotte Chemical climbed 3.37%. Car names like Kia rose nearly 4% and EV battery maker LG Energy Solution rose 2.5% after Tesla’s Investor Day.

South Korean trade official Jeong Dae-jin also held high-level talks with China’s Lie Fei, according to a readout by the ministry. The two discussed stabilizing supply chains and called for further cooperation.

Shares of Chinese electric vehicle maker Nio in Hong Kong are down more than 12% after it reported a larger net loss of 5.79 billion Chinese yuan ($838.9 million) for the fourth quarter.

This follows a nearly 6% drop in US-listed stocks on Wednesday night after earnings were announced.

Nio’s share price in Hong Kong is down more than 12% so far and more than 55% from a year ago.

South Korea’s manufacturing purchasing managers’ index remained in contraction territory for the eighth consecutive month, reaching 48.5 for January.

While this was unchanged from December’s figure, S&P Global said in its note that this was “indicative of a further deterioration in the health of South Korea’s manufacturing sector.”

It also added that the latest PMI data “pointed to further contraction in both production and new orders amid subdued global economic conditions and continued price pressure”.

A PMI reading of 50 indicates expansion, while a reading below 50 indicates contraction.

— Lim Hui Jie

Japanese financial institutions have expressed an interest in buying Japanese government bonds and are looking forward to the Bank of Japan’s possible policy normalization, Nikkei reported.

Sumitomo Mitsui told Nikkei that the base thresholds are 1% for the 10-year rate and 2% for the 20-year rate, expecting bullish sentiment to follow the central bank further widening its yield tolerance.

Mizuho also told Nikkei that domestic investors would buy Japanese government bonds if the central bank abolished the yield curve management system altogether, adding that it sees no market turmoil to follow the move.

– Jihy Lee

The Japanese cabinet’s annual business survey found that industry forecasts for gross domestic production for the coming year averaged 1.3%, down from the previous reading of 1.5%.

The softer outlook was driven by lower expectations from manufacturers compared to non-manufacturers, the study found.

The survey’s five-year outlook, meanwhile, improved from 1.0% to 1.2%, the highest value since 2014.

– Jihy Lee

Shares of some of Tesla’s suppliers are trading mixed after shares of the automaker plunged more than 5% in after-hours trading.

LG Chem, which supplies battery cells to Tesla, saw its share fall 0.59%. But other vendors such as Panasonic saw their shares rise 0.43%, and Samsung SDI saw a bigger increase to 1.95%.

During its investor day presentation on Wednesday, the company said its goal was to produce 20 million electric vehicles per year by 2030.

Notably, Tesla had pledged to cut manufacturing costs for its vehicles in half, with chief engineer Lars Moravy saying the company expects to build its next-generation vehicles for half the cost of the current Model 3 or Model Y.

US-listed shares of Nio fell about 4% after the Chinese electric vehicle maker reported a larger-than-expected operating loss of 6,736.1 million Chinese Yuan ($976.7 million US) for the fourth quarter. That is a much bigger loss than the year before.

While auto revenues of Rmb 14.8 billion (+24% QoQ) were broadly in line, the gross margin of vehicles surprised at 6.8% (down 9.5 ppt QoQ). drastic margin contraction due to: 1) inventory provisions; 2) accelerated depreciation on manufacturing facilities; and 3) losses on purchase commitments to suppliers for NT1.0 models,” said Morgan Stanley analyst Tim Hsiao, who is overweight for the share.

The automaker also issued weak guidance, noted Citi analyst Jeff Chung. He has a Buy rating for the stock, but emphasizes that it is a high-risk investment “given the company’s positioning as a start-up, the early stage of product deliveries, other operational risks, the risk that original financial investors selling interests, as well as the relatively short trading history of the stock.”

UBS, on the other hand, is neutral on the stock, calling it “our least preferred EV name under our cover.”

South Korea recorded a 12.7% contraction in its industrial production for January on an annualized basis, marking its fourth consecutive month of decline.

This was a steeper drop compared to December’s revised figure of a contraction of 10.5%, and also lower than economists’ expectations of 8.9%, according to data from Refinitiv.

The Korean won strengthened slightly against the US dollar on Thursday, trading at 1304.42.

—Lim Hui Jie

Minneapolis Federal Reserve President Neel Kashkari said Wednesday that he is open to a bigger rate hike at this month’s policy meeting, but has not yet made a decision.

“I’m unbiased at this point about whether it’s 25 or 50 basis points,” the central bank official said at an event in his home district.

Kashkari, a voting member of the rate-setting Federal Open Market Committee, said the “dot plot” of individual members’ future expectations will be more important than what was decided at the March 21-22 meeting.

He noted that his “dot” was higher than most other FOMC members at the last meeting, when the commission backed out the level of previous raises to a quarter point. Kashkari indicated that he is likely to swing to the hawkish side again given recent data showing that inflation remains high despite all the rate hikes over the past year.

“At this point, I haven’t decided what my point will look like, but I’m leaning towards continuing to raise. I would continue to push up my policy path,” he said.

—Jeff Cox

Production continued to contract in February as production and new orders slowed, the Institute for Supply Management reported Wednesday.

The closely monitored ISM Manufacturing Index recorded a reading of 47.7%, representing the percentage of companies reporting growth. A reading below 50% indicates contraction.

Economists were looking for a headline of 47.8%, according to Dow Jones.

In the details, new orders rose but remained in a 47% pullback, while the manufacturing index fell to 47.3%. Importantly, industry inflation picked up again, with the price index rising 6.8 percentage points to 51.3%. Employment dropped to a shrinking area with a value of 49.1%.

—Jeff Cox

The yield on 10-year government bonds rose again to 4% as stocks fell lower during afternoon trading.

By mid-afternoon, the 10-year was up 4.004%. The 10-year yield crossed 4% in late morning trading for the first time since Nov. 10, but temporarily fell below that level. Yields move opposite price.

Traders watched the negative correlation between stocks and the benchmark’s 10-year move to the key psychological level of 4%. Chart strategists say the level is not a major resistance, but it is important in terms of impact on investor sentiment.

Technology and growth stocks are particularly sensitive to movements in 10-year yields. The Technology Select Sector SPDR Fund, which represents the technology names in the S&P 500, fell 0.8%.

Bond strategists expect 10-year yields to continue rising ahead of the Fed’s rate decision on March 22. Any strong inflation or even job numbers could be a catalyst for an increase.

Wells Fargo’s Michael Schumacher said the 10-year-old could easily reach 4.20% in the short term.

-Patti Dom

The 60/40 model, where investors put 60% of their money in stocks and 40% in bonds, was once the hub of a typical investment portfolio. Morgan Stanley’s Jim Caron tells CNBC if he still believes rates have been higher for longer.

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— Zavier Ong

The rise in government bond yields is taking the markets by storm, and investors are now looking to bonds for yield, especially in the short term.

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— Weizhen Tan