Asian Stocks to Fall, Treasury Yields Extend Rise: Markets Wrap

2023-09-28 08:26

Shares in Asia headed for early declines as investors grappled with the expectation of higher interest rates and

Asian Stocks to Fall, Treasury Yields Extend Rise: Markets Wrap

Shares in Asia headed for early declines as investors grappled with the expectation of higher interest rates and rising oil prices after crude traded at a one-year high.

Equity futures for benchmarks in Japan, Australia and Hong Kong all fell after Wall Street ended Wednesday flat, failing to avert a ninth consecutive decline for a widely-watched measure of global equities — it’s worst losing streak in a dozen years. US futures were moderately higher in early Asian trading.

The 10-year Treasury yield traded above 4.6% Wednesday, the highest since 2007, amid concerns about dwindling crude stockpiles and pressures on consumers. The ICE BofA MOVE Index — which tracks expected bond volatility — hit the highest in a month this week. Australian and New Zealand yields gained early Thursday.

Those moves supported the greenback, pushing the Bloomberg dollar index to the highest level since November. The index was little changed in early Thursday trade after climbing for six sessions in a row, its longest run of advances in a year.

“We are at an inflexion point in the economy and the bond market,” Bob Michele, CIO for fixed income at JPMorgan Asset Management, said in an interview with Bloomberg Television. “The last 15 years were not normal, we got to a structural low and now we are going to revert to something that is more normal.”

Oil inched higher after West Texas Intermediate, the US benchmark, set a fresh one-year high Wednesday as crude stockpiles declined.

Neel Kashkari, Minneapolis Federal Reserve President, said a potential US government shutdown and the effects of the autoworker strike may slow the economy, requiring less aggressive moves from the central bank.

“If these downside scenarios hit the US economy, we might then have to do less with our monetary policy to bring inflation back down to 2%,” Kashkari said in an interview on CNN.

Fed Chair Jerome Powell and a handful of other central bank officials are set to speak later Thursday. Data on the docket for release include US gross domestic product and initial jobless claims ahead of the personal consumption expenditures price on Friday, the Fed’s preferred inflation gauge.

In Asia, investors will be closely watching China’s property sector for further signs of strain after the founder of China Evergrande Group was placed under police control. A Bloomberg Intelligence index of developers touched the lowest level since 2011 on Wednesday.

Global stocks also face the risk of further selling linked to a large options position held by a JPMorgan Chase & Co. equity fund. Tens of thousands of protective put contracts held by the fund will expire Friday at a strike price not far below the current level of the S&P 500, creating the potential for market dislocations.

Elsewhere, gold edged higher after a run of declines this week while Bitcoin traded above $26,000.

Key events this week:

Eurozone economic confidence, consumer confidence, Thursday
US initial jobless claims, GDP, Thursday
Fed Chair Jerome Powell town hall meeting with educators while Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee make speeches, Thursday
Eurozone CPI, Friday
Japan unemployment, industrial production, retail sales, Tokyo CPI, Friday
US consumer spending, wholesale inventories, University of Michigan consumer sentiment, Friday
ECB President Christine Lagarde speaks, Friday
New York Fed President John Williams speaks, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.1% as of 8:37 a.m. Tokyo time. The S&P 500 was little changed
Nasdaq 100 futures rose 0.2%. The Nasdaq 100 rose 0.2%
Nikkei 225 futures rose 0.2%
Hang Seng futures fell 0.3%
S&P/ASX 200 futures fell 0.2%

Currencies