Asian stocks declined into a third day following falls on Wall Street as tensions escalated in the Middle East, driving gold and oil to further advances. Meanwhile, traders weighed Federal Reserve chairman Jerome Powell’s remarks for any clues on the policy outlook.
(Bloomberg) — Asian stocks declined into a third day following falls on Wall Street as tensions escalated in the Middle East, driving gold and oil to further advances. Meanwhile, traders weighed Federal Reserve chairman Jerome Powell’s remarks for any clues on the policy outlook.
Shares in Australia, Japan and South Korea all slipped sending a gauge for the region into its third straight loss. Contracts for US equities fell after the S&P 500 declined weighed by disappointing Tesla Inc. earnings. The dollar edged higher.
Oil traded over the $90-a-barrel mark and gold approached the $2,000-an-ounce level following a report US bases in Iraq and Syria were targeted in drone attacks. Investors were also on edge after an American destroyer in the Red Sea intercepted cruise missiles and drones fired toward Israel by Houthi rebels in Yemen.
Treasury 10-year yields hovered near 5% in Asian trading, while two-year rates held losses after Powell said the Federal Reserve will proceed carefully with rate hikes, while citing evidence that policy isn’t “too tight.” Swaps trimmed the implied odds of another Fed rate increase to under 50%, and priced a start to cuts in July, compared with September previously.
“Jay Powell is putting to bed any chance of a Nov. 1 rate hike. As to not let markets get carried away though, he left the door open for more rate hikes,” said Peter Boockvar, author of the Boock Report. “Short rates are falling as they are likely done, but the rise in long rates is proving again that they are losing their grip on that part of the market.”
Markets largely shrugged off Japan’s inflation that slid below 3% for the first time in more than a year, while bond traders will be on alert for a round of unscheduled BOJ bond buying operations should the 10-year yield reach 0.85%.
Fed Bank of Chicago President Austan Goolsbee said he’s hopeful the US is able to avoid a recession despite rapid and steep interest-rate hikes over the past 18 months. He emphasized the need for the Fed to ensure inflation was on track to ease to its 2% goal and for inflation expectations to stay anchored.
Thursday’s economic reports were mixed. Applications for US unemployment benefits dropped to the lowest level since January as the labor market kept powering ahead. Sales of previously owned US homes fell to the lowest level since 2010 as affordability worsened even further.
Traders will soon shift their attention to China’s prime rate decision later Friday after the People’s Bank of China kept the MLF interest rate steady earlier in the week.
Key events this week:
- Japan CPI, Friday
- China loan prime rates, Friday
- Philadelphia Fed President Patrick Harker speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.3% as of 9:32 a.m. Tokyo time. The S&P 500 fell 0.9%
- Nasdaq 100 futures fell 0.3%. The Nasdaq 100 fell 0.9%
- Hang Seng futures were little changed
- Nikkei 225 futures (OSE) fell 0.8%
- Japan’s Topix fell 0.7%
- Australia’s S&P/ASX 200 fell 1.3%
- Euro Stoxx 50 futures fell 0.8%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was little changed at $1.0575
- The Japanese yen was little changed at 149.84 per dollar
- The offshore yuan was little changed at 7.3374 per dollar
- The Australian dollar fell 0.3% to $0.6311
Cryptocurrencies
- Bitcoin was little changed at $28,701.92
- Ether was little changed at $1,566
Bonds
- The yield on 10-year Treasuries declined two basis points to 4.97%
- Japan’s 10-year yield was unchanged at 0.840%
- Australia’s 10-year yield declined two basis points to 4.76%
Commodities
- West Texas Intermediate crude rose 1.1% to $90.36 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
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