An electronic board shows Shanghai and Shenzhen stock indices in the Lujiazui financial district in Shanghai, China, October 25, 2022. Portal/Aly Song/File Photo Acquire LICENSE RIGHTS
SINGAPORE, Oct 19 (Portal) – Asian stocks fell on Thursday as risk aversion prevailed amid growing concerns over the Middle East conflict, while the bond sell-off intensified and government bond yields rose to a new 16-year period ahead of a highly anticipated speech. Annual highs were driven by Fed Chairman Jerome Powell.
Investors sought safer assets, keeping gold prices near two-month highs and the dollar holding steady. MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell 1.42%.
The broad selloff in U.S. Treasuries continued into the Asian hours, with the 10-year bond yield hitting a new 16-year high as investors grapple with the Federal Reserve’s message that interest rates will remain higher for longer could. Yields rise when bond prices fall.
The gloom is likely to continue as Europe wakes up. Futures suggested that stock markets in the region were set for a lower opening price: Eurostoxx 50 futures lost 0.61%, German DAX futures lost 0.59% and FTSE futures lost 0.35% .
US President Joe Biden promised to help Israel and the Palestinians during a quick visit on Wednesday.
The region remained unstable after an explosion at Gaza’s Al-Ahli al-Arabi hospital late Tuesday that Palestinian officials said killed 471 people and blamed on an Israeli airstrike. Israel and the United States said the cause was a failed rocket launch by Islamist militants in Gaza, who denied responsibility.
“It’s a pretty chaotic and uncertain situation at the moment,” said Shane Oliver, head of investment strategy and chief economist at AMP in Sydney. “If the conflict remains confined to Israel, that will be terrible, but markets will learn to live with it, just as they did with the Ukraine war.”
“Alternatively, if it spreads to major oil producers, particularly Iran – where the risk is highest – that would be a major problem,” Oliver said.
Oil prices fell on Thursday after OPEC showed no signs of supporting Iran’s call for an oil embargo on Israel and as the United States plans to ease sanctions on Venezuela to allow more oil to flow around the world.
Oil prices had risen 2% in the previous session amid concerns about disruptions to global supplies.
Meanwhile, investors’ concerns about geopolitical risks following a widening U.S. chip export ban cast a shadow over Chinese stocks, although there was some good news on Wednesday from a flurry of data that underscored an economy showing signs of stabilizing.
Concerns about China’s real estate sector have also unsettled investors.
Country Garden (2007.HK) bondholders are urgently seeking talks with the company and its advisers after the troubled real estate developer missed a $15 million coupon repayment, putting the company at risk of default, three sources said Portal with.
China’s blue-chip stock index CSI300 (.CSI300) fell 1.61%, while the Hang Seng Index (.HSI) fell 2%. Japan’s Nikkei (.N225) fell 1.58%.
Waiting for Powell
The focus now is on Fed Chairman Jerome Powell, who will take the podium in New York on Thursday alongside his Federal Reserve colleagues, apparently agreeing to leave interest rates unchanged at their next meeting in two weeks.
A Portal poll of economists showed the Federal Reserve will leave its key interest rate unchanged on November 1 and may wait longer than previously thought to cut.
While a slim majority still expect a cut before mid-2024, a significant minority of forecasters, about 45%, now expect no rate cut until the second half of next year or later, down from 29% in the last survey.
“I think he (Powell) will hedge his bets in this environment,” said AMP’s Oliver, noting that Powell is likely to reiterate the higher price in the longer term.
The 10-year Treasury yield rose 6.4 basis points to 4.966%, reaching its highest level since mid-2007.
The dollar index, which measures the U.S. currency against six rivals, rose 0.056%. The Japanese yen was at 149.80 per dollar.
U.S. crude fell 0.16% to $88.18 a barrel and Brent settled at $91.11, down 0.43% on the day.
The spot gold price was at $1,948.42 an ounce, just below $1,962.39, the highest since August 1, reached earlier this week. Gold prices have risen 6% in the last two weeks.
Reporting by Ankur Banerjee; Edited by Christopher Cushing and Lincoln Feast.
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