(Bloomberg) – Equities in Asia are poised to trail Wall Street lower amid Treasury yields at multi-year highs and high inflation motivating hawkish monetary policy.
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Stock futures for Japan, Australia and Hong Kong fell, while an index of U.S.-listed Chinese companies fell more than 7% to a nine-year low. Worries over China’s economic outlook and a spike in Covid cases amid the two-decade party congress are also weighing on investor sentiment in Asia.
The offshore yuan is trading near a new record low while the yen depreciated within a hair of the key 150 level against the greenback. Traders are wary of a possible intervention from Japan to support the currency.
Rising global interest rates also pushed Japan’s benchmark 10-year bond yield above the upper 0.25% limit of the central bank’s target range. The break may prompt him to step up bond purchases to limit the advance.
Ten-year government bond yields jumped about 10 basis points in Australia and New Zealand, after a similar move in US Treasuries. The more policy-sensitive two-year Treasury yield hit its highest level since 2007 on Wednesday, in turn boosting the dollar against its major counterparts.
The day that marked the 35th anniversary of the stock market crash saw the U.S. market halt a back-to-back rally, making any call for a bottom elusive. Even bright earnings spots like Netflix Inc. and United Airlines Holdings Inc. were unable to enthuse investors about more gains in the S&P 500. A late-day rout at Tesla Inc. on disappointing sales could further weigh on sentiment.
“Earnings don’t allow us to see this capitulation and reset in 2023 earnings expectations yet,” Morgan Stanley’s Lisa Shalett told Bloomberg Television. “It is not yet a clearing event that establishes a sustainable and viable bottom in this market.”
Federal Reserve Bank of St. Louis President James Bullard said he expects the central bank to end its “preload” of aggressive interest rate hikes by the start. next year and adopt a sufficiently restrictive policy with small adjustments as inflation cools.
The Fed is expected to raise interest rates by 75 basis points at its Nov. 1-2 meeting — its fourth straight increase of this size — as central bankers seek to quell the highest inflation in four decades.
Key events this week:
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US existing home sales, initial jobless claims, Conference Board leading index, Thursday
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Eurozone consumer confidence, Friday
Some of the major movements in the markets:
Shares
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S&P 500 futures were flat at 7:05 a.m. in Tokyo. The S&P 500 fell 0.7% on Wednesday
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Nasdaq 100 futures fell 0.2%. The Nasdaq 100 fell 0.4%
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Nikkei 225 futures fell 0.5%
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Australian S&P/ASX 200 index futures fell 0.7%
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Hang Seng index futures fell 1.6%
Currencies
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The Bloomberg Dollar Spot Index rose 0.6% on Wednesday
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The euro was little changed at $0.9774
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The Japanese yen was little changed at 149.79 per dollar
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The offshore yuan was little changed at 7.2689 to the dollar
Cryptocurrencies
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Bitcoin fell 0.1% to $19,171.5
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Ether fell 0.2% to $1,292.56
Obligations
Goods
–With the help of Rita Nazareth.
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