Asian Stocks Set to Drop as US Shares and Treasuries Extend Selloff
Asian stocks are poised to decline following a continued selloff in US shares and Treasuries, as strong economic data and hawkish comments from Federal Reserve officials fuel speculation that interest rates will remain elevated for a longer period.
Equity futures in Australia, Japan, and Hong Kong are all in the red, while contracts in South Korea and mainland China are showing slight gains. US equity futures are relatively flat after the S&P 500 slipped for the fifth consecutive day, with technology stocks leading the decline.
Treasuries across the US curve saw a drop on Thursday, with two-year yields nearing the 5% mark once again. The dollar resumed its upward trajectory, while the yen fluctuated between gains and losses amid concerns over currency movements. An initial quarter-point rate cut by the Federal Reserve remains priced in for November.
Global markets have been hit hard this week as traders scale back expectations for Fed easing this year, following hawkish remarks from officials and positive US economic data. The MSCI All Country World Index is on track for its biggest weekly decline since October, while the VIX volatility index reached its highest level in over five months.
The focus on inflation is intensifying, with concerns that it could hinder any potential rate cuts in 2024. Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management, believes investors should brace for a higher-for-longer scenario in terms of both inflation and interest rates.
In Asia, investors will be closely monitoring Japanese inflation data for clues on potential policy tightening by the Bank of Japan. Oil prices edged lower, while gold held onto gains amid geopolitical risks and demand from central banks and Chinese consumers.
Israel received its first-ever sovereign downgrade from S&P Global Ratings, citing heightened geopolitical risks in the region.
Key events to watch this week include Japan’s CPI data, speeches from central bank officials, and updates on market movements.
Overall, the market sentiment remains cautious as investors navigate the shifting landscape of global economic conditions and central bank policies.
