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Bonds take a breather, Tencent tumbles

The government bond market rally that had sent U.S. Treasury yields under 1.2per cent and the entire German curve negative fizzled out on Tuesday, though there were more problems in China as internet giant Tencent took another battering.

Bonds take a breather, Tencent tumbles

FILE PHOTO: A man points a computer screen showing stock information in this illustration photo taken in Bordeaux, France, March 30, 2016. REUTERS/Regis Duvignau/File Photo

LONDON: The government bond market rally that had sent U.S. Treasury yields under 1.2per cent and the entire German curve negative fizzled out on Tuesday, though there were more problems in China as internet giant Tencent took another battering.

Rising bank shares helped Europe's main markets make a steady start but the real action was elsewhere.

A Chinese state media outlet branding online games "spiritual opium" was enough to send Tencent tumbling as much as 10per cent in Asia, hot on the heels of its worst month in nearly a decade.

The panic also engulfed gaming rivals NetEase, XD and GMGE and meant a closely-watched China tech index slumped 2.3per cent in its worst day since mid-June.

"China is exerting control over its tech sector and this has already driven a very sharp de-rating," Hasnain Malik, head of equity research at Tellimer said.

He said that there would be no reversal in Beijing although the more than 40per cent slump in many of the biggest Chinese tech firms since February meant valuations versus record high U.S. tech giants meant they might be now worth a "revisit".

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The other big moves were the Australian dollar which jumped half a percent after its central bank stood its ground on tapering its bond buying programme from next month despite ongoing coronavirus lockdowns.

The U.S. dollar meanwhile lurked just off one-month lows after disappointing economic data on Monday. It had also pushed the benchmark 10-year Treasury yield as low as 1.151per cent, its lowest since July 20.

Germany's 10-year yield, the benchmark for the euro zone, fell to its lowest since early February at -0.486per cent. It was last up less than a basis point at -0.47per cent.

Its 30-year yield, which turned negative and sent the whole German yield curve into negative territory on Monday, was hovering around 0per cent.

"There is some definite downside bias in the dollar now," said Vasileios Gkionakis, Global Head of FX Strategy at fund manager Lombard Odier in Switzerland. "You are starting to a see a rotation of growth away from the U.S."

In commodity markets, oil steadied having slumped 3per cent on Monday on a combination of U.S. and Chinese economic worries and whether the sharp rise in COVID-19 Delta variant cases around the world would be severe enough to hurt global growth.

Brent crude was up 33 cents in London at US$73.28 per barrel. U.S. crude inched up to US$71.56 a barrel while gold and industrial metal copper were both slightly lower at US$1,810.45 per ounce and 9,594.50 a tonne respectively.

(Additional reporting by Tom Arnold; Editing by Emelia Sithole-Matarise)

Source: Reuters

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