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- Bond yields continued to rise on Monday, knocking tech stocks around the world once again.
- Higher yields make stocks look less attractive and weigh on the valuations of technology companies.
- Oil prices jumped after an attack on Saudi Arabian oil facilities sparked concern among investors.
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Global tech stocks tumbled on Monday morning as rising bond yields made investors question the high prices of some companies, despite the US being close to passing $1.9 trillion in extra stimulus for the economy.
Elsewhere, an attack on a Saudi Arabian oil facility saw the Brent crude oil price spike above $70 a barrel for the first time in more than a year.
Futures for the US’s tech-heavy Nasdaq 100 index dropped 1.91% on Monday, while S&P 500 futures were off by 0.81%.
Futures for the Dow Jones were down 0.31%, with its more industry-focused companies poised to fare better as economies reopen.
Overnight in Asia, China’s CSI 300 index plunged 3.47%, while Hong Kong’s Hang Seng tech index slumped 6.4%. Japan’s Nikkei 225 slipped 0.42%.
In Europe, the continent-wide Stoxx 600 index climbed 0.65% in morning trading but the UK's FTSE 100 slipped 0.12%.
"Following a strong recovery on Friday, tech stocks are driving global equity indices lower today as higher Treasury yields continue to drive rotation from growth to value companies," said Hussein Sayed, chief market strategist at FXTM.
Bond yields, which move inversely to prices, continued to rise as investors positioned for a strong economic rebound in 2021. The yield on the key 10-year US Treasury note rose 5.1 basis points to 1.605%, around its highest in over a year.
Yields are rising because expectations of stronger growth and inflation are causing investors to demand higher returns on bonds.
But the rise in yields is knocking stocks, as it makes bonds look more attractive. Crucially, it also makes the future earnings of flashy tech stocks - which are less linked to the economic cycle - less appealing to investors. The Nasdaq fell 1.87% the previous week.
Stocks slipped on Monday despite the US Senate passing President Joe Biden's $1.9 trillion stimulus package. It will now go back to the House.
Richard Hunter, head of markets at Interactive Investor, said the stimulus bill and the rollout of vaccines "point to the likelihood of strong growth momentum to come later in the year."
He added: "This in turn leads to the spectre of inflation and rising interest rates, although timing remains uncertain."
The dollar index rose 0.28% to 92.23. Rising US bond yields make dollar-denominated investments look more attractive.
In the oil markets, an attack by the Houthi group on Saudi Arabian oil facilities caused a spike in the price. Saudi Arabia said the attack by the Yemeni group caused no significant damage.
Brent crude climbed above $70 for the first time in over 12 months, before slipping back to $69.25 on Monday morning. WTI crude rose to $66.06 a barrel. The prices had risen last week after the OPEC+ producer group decided to keep production limits in place.
Marshall Gittler, head of investment research at BDSwiss, said: "Production appears to have been unaffected though, so I question how long this knee-jerk reaction will last."
He added: "The market's concern seems to be more the frequency of attacks, rather than their severity."