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Asia stocks mixed as investors watch US Treasury yields

Lisa Micheal 10 Aug 15

Stocks in Asia traded mixed Friday morning as investors watched yields on longer duration U.S. Treasurys.

Mainland Chinese stocks advanced, with the Shanghai composite up 0.62%. The Shenzhen component and Shenzhen composite were up 0.93% and 0.903%, respectively.

Hong Kong's Hang Seng index added 0.45% as shares of Ping An Insurance Group listed in the city jumped 2.52% after the company announced its strongest first half profit growth in a over a decade on Thursday.

In Japan, the Nikkei 225 recovered from an earlier slip to trade fractionally higher, while the Topix index advanced 0.17%.

In South Korea, the Kospi slipped 0.86% following its return from a holiday. Shares of chipmaker SK Hynix fell 1.3% and LG Chem shed 1.24%. Meanwhile, Australia's S&P/ASX 200 traded slightly lower.

Overall, the MSCI Asia ex-Japan index edged up 0.03%.

Investors are watching for movements in the bond market, particularly in U.S. Treasurys. The yield on the 30-year Treasury bond declined to a record low on Thursday, while the yield on the benchmark 10-year Treasury note touched a three-year low.

The yield on the 30-year Treasury bond was last at 1.9917%, while the rate on the 10-year Treasury note was at 1.5387%.

The historic drop in long-term U.S. bond yields came after the interest rates on the closely watched 10-year and 2-year Treasurys inverted — an bond market phenomenon that has historically been a reliable indicator of economic recessions.

Meanwhile, investors continue monitoring developments on the U.S.-China trade front. A spokesperson from China's foreign ministry said Thursday that Beijing hopes the "U.S. side will meet China half-way " on trade issues.

That statement came after China said earlier that the U.S. tariffs "seriously violated" a consensus reached by the two countries' presidents at the G-20 summit in June.

For its part, U.S. Commerce Secretary Wilbur Ross told CNBC Wednesday that a recent delay in upcoming tariffs was "not a quid pro quo " in trade negotiations with Beijing.

"The language used by both parties oozes of continued defensiveness and antagonism," Kathy Lien, managing director of foreign exchange strategy, wrote in a Thursday note.

"As long as this remains the case, investors will be nervous making it difficult for currencies and equities to rally," Lien said.

On Friday, the People's Bank of China set the official midpoint reference for the yuan at 7.0312 per dollar, weaker than expectations of 7.0306 against the greenback in a Reuters estimate.

"The 7 (yuan per dollar) level, having been breached, they can now take it down as the trade war worsens." David Roche, president and global strategist at Independent Strategy, told CNBC's "Squawk Box" on Friday.

"I expect the trade war to worsen and I expect the yuan to be at 7.35, 7.40 within a year," Roche said.

The onshore yuan was last at 7.0384 against the greenback, while its offshore counterpart traded at 7.0538 per dollar.

The yuan has been closely watched since it depreciated past the 7 per dollar mark recently, leading the U.S. Treasury Department to designate China as a currency manipulator.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 98.236 after bouncing from levels below 98.0 yesterday.

The Japanese yen traded at 106.22 against the dollar after a volatile session yesterday that saw seeing highs below 106.0. The Australian dollar changed hands at $0.6781 after rising from levels around $0.675 in the previous session.

Oil prices rose in the morning of Asian trading hours, with international benchmark Brent crude futures adding 0.76% to $58.67 per barrel and U.S. crude futures gaining 1.06% to $55.05 per barrel.

Here's a look at some of the data due today:

  • Hong Kong: Revised gross domestic product data for the second quarter at 4:30 p.m. HK/SIN

— CNBC's Yun Li contributed to this report.