Asian stocks closed predominantly lower on Wednesday as both the dollar and U.S. bond yields appreciated due to hawkish comments from the Federal Reserve and lackluster demand in recent two-year and five-year note auctions.
Heightened geopolitical tensions exerted additional pressure after pro-Iranian Yemeni Houthi group attacked a Greek vessel in the Red Sea.
Chinese markets saw fluctuations but ultimately closed on a firmer note. The Shanghai Composite index inched up to 3,111.02, supported by relaxed requirements for home down payments and mortgages in major cities, along with an upgraded economic outlook for China by the International Monetary Fund.
Conversely, Hong Kong's Hang Seng index fell 1.83%, closing at 18,477.01, following a rally that had boosted the index by over 20% since late January. Lenovo shares dropped 1.7% after announcing a plan to sell $2 billion in zero-coupon convertible bonds to Saudi Arabia's sovereign wealth fund.
In Japan, rising government bond yields negatively impacted growth stocks. The Nikkei average fell 0.77% to 38,556.87, while the broader Topix index decreased by 0.97% to 2,741.62. Tokyo Electric Power Holdings led the declines with an 8.3% drop, and Mitsubishi Electric fell 4.6%. In contrast, Sompo Holdings gained 4.2%.
South Korean markets saw substantial declines with the Kospi average dropping 1.67% to 2,677.30. LG Chem and SK Innovation recorded losses of 5.2% and 2.8%, respectively.
Australian markets also closed in the red after April's consumer price inflation unexpectedly rose to a five-month high, fueling concerns about potential interest rate hikes by the Reserve Bank. The S&P ASX 200 fell by 1.30% to 7,665.60, and the All Ordinaries index declined by 1.23% to 7,935.70.
New Zealand's S&P NZX-50 index closed slightly lower at 11,678.68.
In the U.S., stock performance was mixed overnight. Nvidia's strong performance helped lift the tech-heavy Nasdaq Composite by 0.6% to a new record closing high, while the S&P 500 edged slightly higher. Meanwhile, the Dow Jones Industrial Average fell 0.6% following hawkish statements from Minneapolis Federal Reserve Bank President Neel Kashkari and a rise in the 10-year Treasury yield above 4.5%, alongside weak demand in the recent 2-year and 5-year note auctions.
Economic reports showed an unexpected improvement in U.S. consumer confidence in May, after three consecutive months of decline.
