Asian stocks generally declined on Friday as a global bond selloff pushed long-term U.S. Treasury yields to multi-year highs, dampening investor sentiment. U.S. stock index futures showed little movement during Asian trading after Wall Street ended slightly lower the previous day.
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In Japan, the Nikkei 225 bucked the trend with a rise of 1.3%, while the broader TOPIX gained 1.2%. Japanese stocks benefited from a recovery in technology shares following a three-day holiday break and a weaker yen that supported exporters. Conversely, Hong Kong's Hang Seng index fell nearly 2%, with its TECH sub-index dropping more than 2.5%. Australia's S&P/ASX 200 closed down 0.5%. Trading volumes were thin as mainland Chinese, South Korean, and Taiwanese markets remained closed for holidays.
Equities faced pressure from a sharp selloff in global government bonds, which pushed up borrowing costs. The yield on the U.S. 10-year Treasury reached 5.1852%, following a jump to a 19-year high of 5.2251% in the prior session. The 30-year Treasury yield was at 5.4705%, having touched its highest level since 2004 at 5.5016%.
Japanese government bond yields also increased, with the 10-year yield reaching 3.115%, the highest since 1996. Similarly, Australia's 10-year yield rose to 5.408%. Concerns about persistent inflation, driven by rising oil prices, have bolstered expectations for further monetary tightening. Brent crude prices softened slightly on Friday after a more than 3% rise on Thursday, which was influenced by a Houthi missile attack on Saudi Arabia. This surge was tempered by reports of the U.S. and Iran discussing a phased deal to reopen the Strait of Hormuz.
Market participants are currently pricing in a 70% likelihood of another Federal Reserve rate increase in October, up from about 53% earlier this week. Investors are also awaiting further details from Thursday's meeting between U.S. President Donald Trump and Chinese President Xi Jinping.