Asian stocks slip as global rally skids on inflation fears © Reuters. Men holding umbrellas walk near an electric board showing Nikkei index at a brokerage in Tokyo

By Echo Wang

MIAMI (Reuters) - Asian stocks dipped on Tuesday as rising U.S. Treasury yields and inflation prospects led to a further rotation out of the big tech stocks responsible for a major Wall Street rally during the pandemic.

The Australian S&P/ASX 200 fell 0.11% and South Korea's Kospi declined 0.87% in early trading. Hong Kong's Hang Seng index futures rose 0.54%. Japanese markets are closed for a public holiday on Tuesday.

Oil prices rose on a tight global supply outlook after U.S. production was hammered by frigid weather and an approaching meeting of top crude producers is expected to keep output largely in check.

Bond yields have risen sharply this month as prospects of more U.S. fiscal stimulus boosted hopes for a faster economic recovery globally.

However, that is also fuelling inflation expectations, prompting investors to sell the growth stocks that drove the equity rally during the pandemic.

"The sell-off in bonds is like a car crash in slow motion for equity investors," said Michael McCarthy, chief market strategist at broker CMC Markets in Sydney. "A higher interest rate environment forces investors to consider the opportunity costs of investments. Stocks that have significant borrowing, or produce no income for investors, may be particularly vulnerable."

On Wall Street, the Dow Jones Industrial Average rose 0.09%, eking a small gain. The S&P 500 lost 0.77% and the Nasdaq Composite dropped 2.46%.

High-growth stocks, including Apple Inc (NASDAQ:AAPL), Microsoft Corp (NASDAQ:MSFT), Tesla (NASDAQ:TSLA) Inc and Amazon.com (NASDAQ:AMZN), pulled the Nasdaq down and weighed on the S&P 500.

The Australian dollar traded near breakeven against the greenback at $0.791 after hitting a new three-year high.

Commodity prices rose partly as the U.S. dollar continues its broad-based weakness. Spot gold added 0.06% to $1,809.69 an ounce.

MSCI's all-country world index, which looks at stock market performance across 45 countries, gained 0.04%.

Federal Reserve Chair Jerome Powell delivers his semi-annual testimony before Congress starting Tuesday and is likely to reiterate a commitment to keeping policy super easy for as long as needed to drive inflation higher.

U.S. economic growth as measured by gross domestic product is expected to run more vigorously than at any time in the past 35 years and business investment is expected to run twice as quickly as the broad economy, according to Credit Suisse (SIX:CSGN).

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.18% on Monday, after slipping from a record top last week as the jump in U.S. bond yields unsettled investors.

The dollar index fell 0.287%, with the euro up 0.09% to $1.2165. The Japanese yen strengthened 0.06% versus the greenback at 104.99 per dollar.

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