Stocks stumble as mood shift benefits bonds, dollar


  • Markets
  • Wednesday, 07 Jul 2021

SYDNEY: Asian share markets stumbled on Wednesday as a bout of risk aversion boosted bonds and the dollar, while investors braced for minutes from the Federal Reserve's last meeting which could confirm a hawkish turn in U.S. monetary policy.

Dealers were hard pressed to find a single catalyst for the sudden mood swing, but a Chinese crackdown on tech companies clearly had an impact.

Hong Kong stocks shed another 0.9% to near six-month lows, while U.S.-listed ride-hailing company Didi Global Inc shed more than 20% in New York.

MSCI's broadest index of Asia-Pacific shares outside Japan edged down 0.6%, while Japan's Nikkei slipped 1.2%.

Bucking the trend, Australian stocks managed to firm 0.7% and Chinese blue chips added 0.8%.

EUROSTOXX 50 futures and FTSE futures added 0.1%, while Nasdaq futures and S&P 500 futures barely moved.

Wall Street had been unsettled by a survey showing a slight cooling in the red-hot U.S. services sector, though at 60.1 the ISM index was still historically high.

"Normally any ISM reading approaching 60 or above would be seen as strong, but details play to the idea that there is a speed limit to the recovery amid shortage of inputs and labour, alongside still elevated costs," said Rodrigo Catril, a senior FX strategist at NAB.

The skittish mood helped Treasuries extend their recent rally with yields on U.S. 10-year notes dropping almost 8 basis points overnight to 1.348%. That was the lowest since February and also the largest daily decline since February.

The outperformance of longer-dated debt saw the yield curve bull flatten, which could be a bet the Fed will tighten policy pre-emptively to head off inflation.

Minutes of the Fed's June policy meeting due later on Wednesday might show how serious members were about tapering their asset buying and how early hikes could begin.

Expectations of a hawkish tone helped the dollar rally against a basket of currencies to 92.543, up from a low of 92.003 on Tuesday. The euro dropped back to $1.1823, near its lowest since March while commodity-linked currencies slipped.

The dollar had less luck on the safe-haven yen, holding at 110.57.

"We now expect a period of broad USD strength over coming quarters," said Kim Mundy, a senior currency strategist at CBA.

"Our view boils down to U.S. economic outperformance for a period, so we have downgraded our near-term forecasts for all currencies we monitor against the USD."

In commodity markets, the bounce in the dollar offset the general risk-off mood to leave gold steady at $1,797 an ounce after briefly reaching as high as $1,814 overnight.

Oil prices had shed some recent gains after OPEC producers cancelled a meeting when major players were unable to come to an agreement to increase supply.

Analysts at NatWest Markets said the absence of a deal on expanding output was a positive for prices in the near term, but could be a liability over time.

"A lack of agreement among major oil producers at least opens up the risk that the entire OPEC+ deal collapses, leading major oil producers to significantly step up production much faster," they said on a note.

The market was calmer on Wednesday, with Brent up 3 cents at $74.56 a barrel, while U.S. crude added 12 cents to $73.49. - Reuters

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!

MSCI , monetary policy , S&P 500

   

Next In Business News

Ringgit ends higher against US dollar
Genting Malaysia's unit to buy entire Series F stock of Empire for US$100mil
AME REIT plans to acquire industrial properties in Johor for RM69.3mil
MRCB bags contract for car park operations at Menara Shell, Platinum Sentral
Bursa Malaysia ends lower
Bursa Malaysia CEO takes over as chairperson of CEO Action Network
No merger of AirAsia's aviation business - Tony Fernandes
G7 price cap on Russian oil kicks in, Russia will only sell at market price
Cagamas concludes issuance of RM1.09bil bonds, sukuk
Bursa Malaysia aims for 300 PLCs to participate in transformation programme by 2025

Others Also Read