Asian shares fell on Thursday due to risk aversion due to Middle East tensions, while gold prices remained near two-month peaks. MSCI’s broadest index of Asia-Pacific shares outside Japan was 1.11% lower and on course for a 1.4% decline in the week. Japan’s Nikkei sank 1.35%.
The sell-off in U.S. Treasuries continued into Asian hours, with the yield on 10-year notes touching a 16-year high. Asian equity markets were cautious, adjusting their expectations for a lesser likelihood of a rate cut, increasing long-term yields, and mounting geopolitical uncertainties.
U.S. President Joe Biden pledged to help Israel and the Palestinians during a lightning visit, but a deadly hospital blast he ascribed to an errant rocket fired by Gaza militants derailed talks to prevent the war from spreading. Investors are concerned about geopolitical risks following a US chip export ban, particularly in China’s property sector, despite positive data on Wednesday.
Asia’s short-term risk asset demand could be influenced by uncertainties, as investors monitor potential ripple effects. China’s blue-chip stock index CSI300 fell 0.90%, while the Hang Seng Index fell 1.6%. U.S. stocks ended lower on Wednesday due to elevated Treasury yields, while investors focus on earnings from Taiwan Semiconductor Manufacturing Co Ltd, expected to report a 30% slump in third-quarter profit. Analysts predict strong growth in the chip industry next year as it recovers from its current downturn.
Tesla CEO Elon Musk expressed concern about the impact of high-interest rates on car buyers, as the company missed Wall Street expectations on gross margin, profit, and revenue. Federal Reserve policymakers are signalling a pause in hiking interest rates for another couple of months, with Fed Governor Christopher Waller stating they can wait and watch the economy evolve before making definitive moves. A Reuters poll indicated that the Federal Reserve will keep its key interest rate on hold on Nov. 1 and may wait longer before cutting it.
The yield on 10-year Treasury notes and 30-year Treasury bonds rose by 5.1 basis points to 4.953% and 5.032% respectively. The dollar index rose by 0.019% against six rivals, while the Japanese yen strengthened by 0.10% to 149.79 per dollar. Oil prices eased on Thursday due to OPEC’s lack of support for Iran’s oil embargo on Israel and the US’s plans to ease Venezuela sanctions. US crude fell by 0.27% to $88.08 per barrel, while Brent fell by 0.66%. Spot gold reached $1,948.16 per ounce.