Asian equities experienced a downturn on Thursday, following declines in US stocks and government bonds that created uncertainty regarding imminent Federal Reserve rate cuts. Markets in Japan, Australia, and South Korea faced losses, contributing to a regional equity index poised for its second consecutive decline. Meanwhile, shares in mainland China fluctuated, while Hong Kong’s market saw an uptick as investors processed the latest Chinese manufacturing data, which marked its first expansion since April.
Xiaojia Zhi, chief China economist for Credit Agricole, commented on Bloomberg Television, stating, “We still need to see additional policy easing to boost household consumption and encourage private sector investment.”
US futures were lower, influenced by post-market declines from Microsoft Corp. due to disappointing guidance and earnings results from Meta Platforms Inc. The S&P 500 dropped 0.3% and the Nasdaq 100 fell 0.8% on Wednesday.
In Asian trading, Treasury yields remained stable, while yields in Australia and New Zealand rose. A gauge of the global bond market slipped to its lowest point in nearly three months on Wednesday, as traders reassessed their expectations for policy easing following strong US economic growth in the third quarter, bolstered by increased household spending and defense outlays. Core inflation measures rose to 2.2%, aligning closely with the Federal Reserve’s target.
Concerns over inflation were also amplified by the potential implications of a Donald Trump victory in the upcoming US presidential election. Daniel Yoo, head of asset allocation at Yuanta Securities, remarked, “Who becomes president changes the perspective of the investment cycle,” suggesting that increased tariffs and reduced corporate taxes under Trump could heighten inflation pressures. He added, “This may slow the pace of interest rate reductions or even prevent them altogether.”
In other Asian markets, the yen remained stable at approximately 153 per dollar ahead of the Bank of Japan’s expected decision to maintain its interest rate at 0.25%. Taiwan announced a suspension of stock trading due to an approaching powerful typhoon.
Additionally, a dollar strength index saw a slight decline, while a measure of one-week implied volatility on the Bloomberg Dollar Spot Index rose to its highest level since December 2022, reflecting traders’ expectations for significant currency fluctuations against major counterparts like the euro, yen, Chinese yuan, and Mexican peso.
In commodities, oil prices edged higher, extending gains from the previous session, while gold stabilized around $2,787 per ounce after reaching a new record earlier. The demand for gold has been partly driven by the uncertainty surrounding next week’s election.
Related topics:
