SYDNEY, Oct 18 — Asian shares steadied on Wednesday after Chinese economic data suggested Beijing’s stimulus measures might finally be gaining traction, though a blast at a Gaza hospital dealt a blow to hopes for containing the conflict there.
Global bond markets also still nursed heavy losses as strong US retail data argued for a punishingly long stretch of high rates.
The outlook for the world economy did take a small turn for the better as China reported annual economic growth of 4.9 per cent in the third quarter, beating forecasts for 4.4 per cent.
Retail sales and industrial output for September also surprised on the upside, suggesting activity had been gaining momentum.
That helped Chinese blue chips pare early losses to be down 0.2 per cent, though the initial reaction was muted overall.
The mood had been darkened as Israeli and Palestinian authorities traded blame for the blast that killed hundreds at a Gaza hospital, complicating US President Joe Biden’s already fraught trip to the region.
The news contributed to a spike in oil prices as investors worried Iran or other nations could get pulled in.
“We judge the risks are tilted towards escalation and spread of the Israel-Hamas conflict to other countries in the Middle East,” warned analysts at CBA in a note. “A major spike in volatility and a downgrade of the global economic growth outlook is possible.”
The cautious mood left MSCI’s broadest index of Asia-Pacific shares outside Japan a shade lower, while Japan’s Nikkei dipped 0.2 per cent.
EUROSTOXX 50 futures slipped 0.2 per cent, while FTSE futures were flat. S&P 500 futures and Nasdaq futures both eased 0.2 per cent.
Tech stocks were dragged in part by a drop in Nvidia after news the Biden administration plans to halt shipments to China of more of its advanced artificial intelligence chips.
Markets are now anxiously awaiting earnings from Netflix and Tesla later in the session.
Bonds bruised
Stocks were also pressured by a jump in bond yields after a barnstorming report on September US retail sales sent analysts scurrying to revise up forecasts for economic growth for both the third and fourth quarters.
JPMorgan jacked its growth call up to an annualised 4.3 per cent, from 3.5 per cent, while the influential Atlanta Fed GDPNow prediction jumped to a heady 5.4 per cent.
Markets reacted by pricing in more risk the Federal Reserve will be forced to hike again. A move in November is still seen as just an 11 per cent chance, but January climbed to 50 per cent from 37 per cent.
The market also again scaled back expectations for early rate cuts, with no chance of a move until June and around 54 basis points of easing implied for all of 2024.
Bonds took it badly, with two-year yields surging as much as 14 basis points on Tuesday to a 16-year peak of 5.24 per cent. The two-year was last at 5.20 per cent, while 10-year yields were back near recent highs at 4.84 per cent.
The surge rippled through world bonds, with the Bank of Japan forced to conduct an unscheduled operation to buy JGBs to restrain a rise in yields.
More Fed comments are likely on Wednesday with no less than five officials speaking, ahead of an appearance by Chair Jerome Powell tomorrow.
The rise in yields underpinned the US dollar, particularly on the low-yielding Japanese yen where the dollar reached 149.74 to again threaten major resistance at 150.00.
The euro eased back a touch to US$1.0573 (RM5.01), having been as high as US$1.0595 on Tuesday.
Safe-haven flows lifted gold 0.9 per cent to US$1,940 an ounce, well above its recent trough of US$1,809.
Oil prices swung higher once more, driven by concerns over the Middle East and data showing a fall in crude stocks.
Brent climbed US$2.16 to US$92.06 a barrel, while US crude rose US$2.30 to US$88.96 per barrel. — Reuters
