TOKYO, Oct 13 ― Asian stocks followed Wall Street lower and bond yields remained depressed today as investors weighed the risks of global recession amid hawkish Federal Reserve rhetoric and uncertainty about the Bank of England's commitment to stabilising markets.
The recession risks also fuelled concerns about demand for oil, and crude prices failed to bounce after the previous day's 2 per cent fall.
The dollar held its ground against major peers as traders awaited US consumer price data that could shed light on the pace of further Fed policy tightening.
Japan's Nikkei slipped 0.53 per cent, while South Korea's Kospi slid 1.18 per cent.
Hong Kong's Hang Seng dropped 1.02 per cent, and mainland Chinese blue chips lost 0.64 per cent.
MSCI's broadest index of Asia-Pacific shares sank 0.54 per cent, languishing close to yesterday's 2 1/2-year low.
Australia's stock benchmark was an outlier, eking out a 0.1 per cent gain, buoyed by big gains for Qantas after the airline said it expects to swing to profit for the first-half.
US emini stock futures also offered some slight hope, rising 0.1 per cent following a 0.33 per cent decline in the S&P 500 from overnight.
US long-term Treasury yields languished near the lows of the past two days, sitting little changed at 3.9227 per cent in Tokyo trading.
US rates turned lower overnight after minutes from the Fed's latest policy meeting showed many officials “emphasised the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action,” although several committee members said it would be important to “calibrate” the pace of further rate hikes to reduce the risk of “significant adverse effects” on the economy.
Treasury yields turned lower after the minutes, reversing an earlier rise, with investors focusing on the dovish undertones in taking yields back from near two-decade highs.
But Fed Governor Michelle Bowman struck a hawkish stance in a speech yesterday, saying that if high inflation does not start to wane she will continue to support aggressive rate rises.
Markets lay 90 per cent odds for another 75 basis-point rate hike in November, versus 10 per cent probability of a half-point bump.
The immediate focus for investors now is US consumer price data due later in the global day.
Yesterday's minutes were “not the dovish pivot some market participants are looking for,” Joseph Capurso, head of international economics at Commonwealth Bank of Australia, wrote in a client note.
“A pivot will depend on the inflation data.”
The dollar index, which gauges the greenback against six major rivals, stuck near the middle of its range this week, trading little changed at 113.27.
The US currency remained close to a fresh 24-year high to the yen from overnight at 146.98, last changing hands at 146.85.
But the dollar was little changed versus sterling, which had rebounded strongly from a two-week trough of US$1.0925 on Tuesday. It last traded at US$1.1086.
Benchmark 10-year gilt yields had swung from a fresh 14-year peak at 4.632 per cent to close at 4.429 per cent yesterday, little changed from the previous session.
The Bank of England insisted that its emergency bond market support will expire tomorrow as originally announced, countering media reports of continued aid if necessary.
BoE Governor Andrew Bailey had riled markets on Tuesday by saying British pension funds and other investors hit hard by a slump in bond prices had until that deadline to fix their problems.
“Volatility in UK markets ― gilts and sterling ― remains exceptional,” but “the reality is (the BoE) will necessarily be there if market conditions demand,” Ray Attrill, head of foreign-exchange strategy at National Australia Bank, wrote in a report.
Meanwhile, crude oil markets remained weak. US crude futures fell 7 cents to trade at US$87.20 per barrel in early trade yesterday, while Brent crude futures Lcoc1 eased 1 cent to trade at US$92.44 per barrel. ― Reuters
