SYDNEY: Asian shares fell with Wall Street on Thursday, while a sharp fall in oil prices to a six-month low and a soft reading on the U.S. labour market boosted the global bond market.
European stockmarkets look wary as well ahead of their open, with both EUROSTOXX 50 futures and FTSE futures down 0.6%. S&P 500 and Nasdaq futures were little changed.
The Japanese yen strengthened 0.4% to 146.76 per dollar after Bank of Japan Governor Kazuo Ueda flagged several options on what interest rates to target once the central bank pulls short-term borrowing costs out of negative territory.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.8%, pulling it down 1.9% so far this month after a 7.3% rally in November. Japan's Nikkei fell 1.7%.
Overnight, Wall Street was dragged lower by energy stocks as oil prices slid and by tech shares. The Dow Jones slipped 0.2%, the S&P 500 lost 0.4%, and the Nasdaq Composite fell 0.6%.
Amy Xie Patrick, head of income strategies at Pendal Group, said recent price actions in the equity and bond markets suggest markets were starting to wonder whether the global economy could be heading to a hard landing next year.
"Even though bond yields have continued to fall, equity markets are no longer rallying, credit spreads are no longer tightening. The markets are starting to wonder whether this is a good kind of bond yield rally or is the bond market telling you something a little bit more sinister," Xie Patrick said.
Data overnight showed U.S. private payrolls increased less than expected in November in yet another sign that the American labour market is gradually cooling.
Traders are turning their focus to the weekly jobless claims data later in the day, ahead of the non-farm payroll report due on Friday. Economists expect the economy added 180,000 new jobs in November, picking up from 150,000 the previous month.
The U.S. dollar hovered near a two-week high at 104.19 against its major peers heading into the non-farm payroll release on Friday. Markets have priced in so much easing that they are clearly vulnerable to an upside payroll surprise.
Asian bonds followed the overnight moves in Treasuries. Australian 10-year government bond yield hit a 2-1/2 month low of 4.225% on Thursday.
The yield on the benchmark U.S. 10-year Treasury note bounced off a three-month low, up 3 basis points to 4.1515%. It fell 11 basis points overnight.
Sentiment on China remained bearish after Moody's slapped a downgrade warning on China's credit rating and cut outlooks for Hong Kong, Macau and Chinese local government financing vehicles.
Mixed trade data
out of China also failed to provide much impetus. November exports rose for the first time in six months while imports unexpectedly shrank, suggesting domestic demand remained weak.
China's bluechips index was last down 0.2% after hitting a five-year trough earlier in the session. Hong Kong's Hang Seng index fell 1.2% to a 13-month low.
Oil prices steadied after falling nearly 4% overnight to their lowest settlements since June, in welcome news for inflation and bond yields. Worries about global fuel demand drove prices lower, despite pledges from OPEC+ producers that they would keep a tight lid on supply.
Brent crude futures edged up 0.6% to $74.72 a barrel while U.S. West Texas Intermediate futures rose 0.6% to $69.78 a barrel.
Gold prices were flat at $2,025.96 per ounce. - Reuters