Global shares slip as US yields march on

SINGAPORE/LONDON, Oct 21 (Reuters): US Treasury yields held near multiyear highs on Friday, with markets seeing no end to tightening from the Federal Reserve, causing shares to slip and the dollar to strengthen, particularly on the yen, against which it hit a new 32 year top.

The benchmark US 10-year yield edged up as high as 4.291 per cent, its highest level since June 2008, having risen nearly 10 basis points overnight.

This dragged on shares, with Europe's STOXX index falling 1.3 per cent, US S&P500 futures sliding 0.6 per cent and MSCI's broadest index of Asia-Pacific shares outside Japan down 0.92 per cent, languishing near the two-and-a-half year intraday low it touched the day before.

"It's all so tenuous... The problem is the macro environment still remains difficult," said Shane Oliver, chief economist at AMP Capital, adding that the market is in a tug of war between investors who see opportunities and those who are focused on the difficult backdrop.

Global markets have been extremely volatile as investors worry that hefty rate hikes will push major economies into recessions before inflation is tamed, while the resulting stronger dollar could wreak havoc in emerging markets. Philadelphia Federal Reserve President Patrick Harker on Thursday suggested the central bank will "keep raising rates for a while," while U.S. economic data showed persistent labour market tightness.

Third-quarter corporate earnings have offered little help to equities. On Friday Adidas shares dropped 10 per cent as the German sporting goods maker cut its full-year outlook, citing weaker demand.