Shares in Asia are primed for declines Thursday after a selloff in US stocks and bonds following hawkish comments in minutes of the Federal Reserve’s last meeting.
(Bloomberg) — Shares in Asia are primed for declines Thursday after a selloff in US stocks and bonds following hawkish comments in minutes of the Federal Reserve’s last meeting.
Equity futures for benchmarks in Japan, Australia and Hong Kong all declined. The S&P 500 fell 0.8% Wednesday while the Nasdaq 100 dropped 1.1%, with heavyweights Meta Platforms Inc, Amazon.com Inc. and Tesla Inc, down more than 1.5%. US futures were little changed in early Asian trading.
Advertisement 2
Story continues below
The 10-year Treasury yield touched fresh intraday highs not seen since October, while yields on the policy-sensitive two-year notes inched higher to near 5%. The selling erased gains for the year for an index of US government debt.
Those moves followed minutes from the Fed’s July meeting that fanned concerns the central bank would continue to raise interest rates to quell inflation.
“The Fed has no choice but to keep it up until they are convinced that inflationary expectations are quashed,” Steve Sosnick, chief strategist at Interactive Brokers, said after the minutes were released. “Doing otherwise risks some of the embers reigniting. Even though two governors favored keeping rates steady in July, it is important to keep in mind that a pause is not a pivot.”
The Bloomberg dollar index rose to a two-month high and the pound also strengthened following higher-than-expected UK inflation data.
Australian and New Zealand bond yields rose in early Thursday trade. Australian jobs data due later is expected to show slowing in new hires and an increase in the unemployment rate.
Advertisement 3
Story continues below
The yen slumped to a 2023 low and traded at levels that previously that triggered Japan’s intervention in September, while the offshore yuan weakened against the backdrop of financial and economic concerns.
One of China’s biggest shadow banks skipped payments on several investment products, sparking rare protests in Beijing. The company offers high-yielding trust products linked to the country’s embattled real estate market. Revenue from Tencent Holdings Ltd. disappointed in a warning for the country’s tech sector, and a unit of China Evergrande Group said the Chinese securities regulator has built a case against it relating to suspected information disclosure violations.
Those worries come as China’s central bank moved to boost fragile sentiment with a stronger-than-expected reference rate for the yuan and the largest injection of short-term cash to the financial system since February. So far the steps have failed to restore optimism, with the US Treasury warning about the consequences for the global economy.
Still, markets are not yet fully reflecting the risks from China’s deteriorating fundamentals, according to Tiffany Wilding, an economist and managing director at Pacific Investment Management Co.
Advertisement 4
Story continues below
“Given the usual lags, deflationary spillovers have likely only just begun to impact global consumer markets,” Wilding wrote in a note to clients. “Discounting likely to accelerate over the coming quarters.”
Corporate Highlights:
Key events this week
Some of the main moves in markets:
Stocks
Advertisement 5
Story continues below
Currencies
Cryptocurrencies
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
Comments
Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.
Join the Conversation