Shares in Asia fell as investors grappled with the expectation of higher interest rates and rising oil prices after crude extended a one-year high.
(Bloomberg) — Shares in Asia fell as investors grappled with the expectation of higher interest rates and rising oil prices after crude extended a one-year high.
Equity benchmarks in Japan and New Zealand declined, while Australia stocks traded flat after earlier losses. Thursday marks the last trading day for mainland Chinese markets before reopening Oct. 9.
US futures ticked higher after Wall Street ended Wednesday flat, failing to avert a ninth consecutive decline for a widely-watched measure of global equities — its worst losing streak in a dozen years.
Oil propelled closer to the $100-a-barrel mark after stockpiles at the major US storage hub dropped to critical levels. West Texas Intermediate, the US benchmark, continued gains in Asian trading after setting a fresh one-year high Wednesday.
The moves sent the 10-year Treasury yield above 4.6%, the highest since 2007. The ICE BofA MOVE Index — which tracks expected bond volatility — hit the highest in a month this week. Australian and New Zealand yields followed these gains early Thursday.
September has reasserted its tough reputation. The month is shaping up as the worst for global stocks in a year, while the 10-year Treasury yield has also risen by the most since last September.
“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.”
The Bloomberg dollar index was steady after touching the highest level since November. The index has climbed for six sessions in a row, its longest run of advances in a year. Meanwhile. the yen strengthened slightly on Thursday but remained near 150 per dollar.
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:
- S&P 500 futures rose 0.2% as of 9:38 a.m. Tokyo time. The S&P 500 was little changed
- Nasdaq 100 futures rose 0.3%. The Nasdaq 100 rose 0.2%
- Hang Seng futures fell 0.3%
- Japan’s Topix fell 0.8%
- Australia’s S&P/ASX 200 was little changed
- Euro Stoxx 50 futures rose 0.1%
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0513
- The Japanese yen rose 0.1% to 149.46 per dollar
- The offshore yuan was little changed at 7.3207 per dollar
- The Australian dollar was little changed at $0.6357
- Bitcoin rose 0.8% to $26,436.82
- Ether rose 0.4% to $1,601.05
- The yield on 10-year Treasuries was little changed at 4.60%
- Japan’s 10-year yield advanced 1.5 basis points to 0.745%
- Australia’s 10-year yield advanced eight basis points to 4.45%
- West Texas Intermediate crude rose 0.7% to $94.34 a barrel
- Spot gold rose 0.1% to $1,877.61 an ounce
This story was produced with the assistance of Bloomberg Automation.
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