Asian stocks broadly fell as volatility gripped global markets from an escalation in tensions in the Middle East, driving oil and gold to further advances.
(Bloomberg) — Asian stocks broadly fell as volatility gripped global markets from an escalation in tensions in the Middle East, driving oil and gold to further advances.
Chinese indexes pared earlier losses as policymakers pumped a record amount of short-term cash into its financial system. MSCI’s Asia Pacific Index – a gauge for benchmarks in the region – lost 0.4% and is set for its biggest weekly drop in two months. Contracts for US equities declined in Asia after the S&P 500 fell on Thursday.
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.
Currency markets remain on tenterhooks as Japan’s finance minister Shunichi Suzuki said it was important the yen moved stably and in line with fundamentals, just as the currency approached 150 per dollar. Eyes will also be focused on unscheduled Bank of Japan bond buying operations should the 10-year yield reach 0.85%. Earlier, markets largely shrugged off Japan’s inflation that slid below 3% for the first time in more than a year.
The Treasury curve flattened after gains in the previous session when Federal Reserve chairman Powell said it 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.”
China’s injection of extra cash will offer a much-needed boost to maintain the nation’s growth momentum. This year, the economy has been challenged by a lack of demand and a downturn in the property market. Earlier this week, the PBOC made the largest liquidity injection since late 2020 with one-year policy loans via the so-called medium-term lending facility.
READ: China’s Country Garden Default Is All But Official, Restructuring Looms
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.
Key events this week:
- Philadelphia Fed President Patrick Harker speaks, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 12:21 p.m. Tokyo time. The S&P 500 fell 0.9%
- Nasdaq 100 futures fell 0.3%. The Nasdaq 100 fell 0.9%
- Japan’s Topix fell 0.4%
- Australia’s S&P/ASX 200 fell 1.2%
- Hong Kong’s Hang Seng fell 0.3%
- The Shanghai Composite fell 0.3%
- Euro Stoxx 50 futures fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0576
- The Japanese yen was little changed at 149.84 per dollar
- The offshore yuan was little changed at 7.3325 per dollar
- The Australian dollar fell 0.2% to $0.6319
Cryptocurrencies
- Bitcoin rose 1.4% to $29,143.93
- Ether rose 1.5% to $1,590.5
Bonds
- The yield on 10-year Treasuries declined four basis points to 4.94%
- Japan’s 10-year yield was little changed at 0.835%
- Australia’s 10-year yield declined four basis points to 4.74%
Commodities
- West Texas Intermediate crude rose 1.6% to $90.78 a barrel
- Spot gold rose 0.2% to $1,978.13 an ounce
This story was produced with the assistance of Bloomberg Automation.
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