Asian Stocks Waver : Asian stocks experienced a minor setback today, ending a three-day winning streak. The cause? A mixture of Chinese trade data and uncertain sentiments about the trajectory of global interest rates. However, there’s an interesting twist in Australia’s rate hike.
The Reserve Bank of Australia went ahead with a 25 basis point increase, which was somewhat expected due to stubbornly high inflation in the last quarter. However, what’s caught the market’s attention is the shift in language regarding the future outlook. This change in tone has prompted bonds to rally and has taken a toll on the Australian dollar, with speculations arising that the rate hikes might have come to an end.
The MSCI’s broadest index of Asia-Pacific shares outside Japan faced a 1.2% decline after a strong three-day rally that had previously boosted the benchmark by nearly 6%. Meanwhile, South Korean shares witnessed a 3% drop, as Monday’s surge, triggered by the reimposition of a short-selling ban, began to unravel. Japan’s Nikkei fell 1.1%, adding to the overall picture of decline in the region.
China’s trade data added an extra layer of complexity to the economic landscape. While imports unexpectedly grew in October, exports experienced a sharper contraction than anticipated, revealing the ongoing unevenness in the world’s second-largest economy’s recovery. This was reflected in the Shanghai Composite, which fell 0.4%.
Also Read: Asian Stocks Decline: US Dollar Gains Amidst Inflation Data and Market Volatility
In the realm of treasuries, they remained relatively steady in Asia, having shed some of the gains made last week on Monday. Ten-year yields hovered around 4.92%, which is about 10 basis points higher than their closing level on the previous Friday but still below where they were a week earlier.
Overnight in the U.S., the Nasdaq continued its gains, marking a seven-session streak, the longest since January, although the rise was a modest 0.3% as the rally seemed to lose some steam. S&P 500 futures and European futures both dipped by 0.2%.
In the world of foreign exchange, the Australian dollar was a prominent mover in the Asian time zone, and Australian government bonds also rallied, particularly at the short end, as traders perceived the RBA’s language as a sign that rate hikes might be done for the moment.
Elsewhere, a slightly stronger dollar pushed the Japanese yen back to the weaker side of 150 to the dollar. The euro took a pause at $1.0710, with analysts anticipating a potential decline in the greenback to be bumpy and modest, even if the Fed begins to reduce rates next year. The U.S. dollar index remained steady at 105.36.
Looking at commodities, oil held its ground, with Brent crude futures at $84.75 a barrel. This was supported by concerns that conflicts in the Middle East could escalate and disrupt supply, along with reassurances from Russia and Saudi Arabia about production cuts. Gold was treading carefully with modest losses at $1,972, and bitcoin lingered just shy of $35,000.