Hong Kong (AFP) – Asian markets mostly fell Thursday following steep losses on Wall Street as a spike in US Treasury yields led investors to scale back their expectations on interest rate cuts. With the US presidential election still seen as a coin toss less than two weeks out, there was plenty of uncertainty on trading floors. Observers said dealers were eyeing a win for Donald Trump and policies that could stoke inflation again.
That, along with a strong run of economic data and remarks from Federal Reserve officials backing a cautious approach to easing monetary policy, has seen expectations for rate cuts whittled back. Traders had previously been confident that the central bank would follow up last month’s bumper 50-basis-point cut with another at its November meeting and a smaller one in December. But those expectations have diminished as Treasury yields push higher to 4.24 percent, compared with 3.73 percent in September.
Observers said there is concern that a win for Trump over Democratic rival Kamala Harris could see him introduce tax cuts, ramp up trade tariffs, and push for more deregulation. This has fuelled the so-called Trump trade, in which investors jockey for positions to prepare for such an eventuality. Sentiment has been “weighed down by the move up in yields and push back on Fed rate cut expectations,” said National Australia Bank’s Rodrigo Catril.
“Solid economic momentum as well as Fed messaging emphasising a gradual and deliberate approach to further policy easing is making the market nervous,” he added. “Then once you add the upcoming US election alongside its associated uncertainty (higher or lower taxes?, more or less regulation?, new trade war?), taking some chips off the table makes sense.”
All three main indexes on Wall Street finished well down, with the Nasdaq losing more than one percent. Hong Kong led the retreat in Asia, similarly shedding more than one percent, while Shanghai, Sydney, Seoul, Taipei, Bangkok, Mumbai, Jakarta, and Manila were also lower. But Tokyo, Singapore, and Wellington rose, along with London, Paris, and Frankfurt.
The dollar held gains after a drop in rate cut expectations pushed it up against its peers, bringing it to a near three-month high against the yen and a two-and-a-half-month high against sterling. Dealers will be keeping tabs on Tokyo ahead of next week’s Bank of Japan policy decision, which is expected to see it hold tight on borrowing costs, having hiked twice this year.
Gold extended Wednesday’s drop from a record high as bonds offer better returns than the precious metal, which does not provide interest. And oil prices rose more than one percent, clawing back much of the previous day’s drop as dealers try to assess the demand outlook and the crisis in the Middle East amid fears about Israel’s plans to retaliate against Iran for this month’s missile attack.
– Key figures around 0710 GMT –
Tokyo – Nikkei 225: UP 0.1 percent at 38,143.29 (close)
Hong Kong – Hang Seng Index: DOWN 1.3 percent at 20,489.62 (close)
Shanghai – Composite: DOWN 0.7 percent at 3,280.26 (close)
London – FTSE 100: UP 0.7 percent at 8,316.35
Euro/dollar: UP at $1.0798 from $1.0787 on Wednesday
Pound/dollar: UP at $1.2968 from $1.2929
Dollar/yen: DOWN at 152.21 yen from 152.65 yen
Euro/pound: DOWN at 83.25 pence from 83.41 pence
West Texas Intermediate: UP 1.7 percent at $71.94 per barrel
Brent North Sea Crude: UP 1.5 percent at $76.09 per barrel
New York – Dow: DOWN 1.0 percent at 42,514.95 (close)
© 2024 AFP
