SINGAPORE, Nov 7 — Asian stocks snapped a three-day winning streak today, as investor enthusiasm about a peak in global interest rates started losing steam, while the Australian dollar fell after a rate hike came with a shift in tone from the central bank.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.2 per cent. Over the previous three sessions, a rally had lifted the benchmark by nearly 6 per cent.
S&P 500 futures fell 0.2 per cent, as did FTSE futures while European futures fell 0.3 per cent.
Treasuries were broadly steady in Asia, having unwound a little of the rally that followed the Federal Reserve’s decision to leave interest rates on hold last week.
Ten-year yields hovered at 4.63 per cent — about 10 basis points (bps) above where they closed on Friday, but well below the 5 per cent mark touched in late October.
“It continues to be a tug-of-war between markets and the Fed, as the latter has suggested that higher long-end yields would ... do the job of policy tightening for them,” said Nicholas Chia, macro strategist at Standard Chartered.
“Markets probably fret that lower yields would force the Fed to re-think about an extended pause.”
Fed funds futures imply only a slim chance of another hike, but bets on rate cuts next year were trimmed.
In foreign exchange trade, the Australian dollar was the biggest mover, falling about 0.9 per cent to US$0.6430 after the Reserve Bank of Australia announced a 25 bp hike, as expected, taking the cash rate to a 12-year high of 4.35 per cent.
But the central bank softened its language on the necessity of any further action.
“It was a dovish hike ... it’s not pointing to any immediate need for a follow-up,” said RBC Capital Markets rates strategist Rob Thompson on the phone from Sydney.
The New Zealand dollar was dragged along for the ride, falling 0.6 per cent to US$0.5930. Three-year Australian government bond futures YTTc1 rallied three ticks and the ASX200 lifted off lows to finish down 0.3 per cent. AUD/.AX
Demand pressure
Data today showed China’s imports unexpectedly grew in October, while exports contracted faster than expected, in a mixed set of indicators that showed the recovery in the world’s second-largest economy remains uneven.
“The combined effects of both tight credit and a rotation to services consumption exerts further pressure on global demand for goods,” said HSBC economist Erin Xin in a note.
Hong Kong’s Hang Seng fell 1.4 per cent, while mainland China blue chips fell 0.5 per cent.
South Korean shares fell 3 per cent as traders unwound some of yesterday's surge on the reimposition of a short-selling ban. Japan’s Nikkei fell 1.1 per cent.
On Wall Street the Nasdaq had logged a seventh straight session of gains yesterday — capping its longest streak since January — though its gain was a slender 0.3 per cent as the rally loses momentum.
A slightly stronger dollar has pushed the Japanese yen back to the weak side of 150 to the dollar, and it hovered at 150.2 in the Asia session.
The euro took a breather at US$1.0710 and analysts expect any prospective decline in the greenback to be bumpy and modest, even if the Fed starts cutting rates next year.
The US dollar index was steady at 105.36.
“Outside of monetary policy, it is weak global growth and abundant geopolitical risks ranging from Taiwan to the Middle East and Russia that we see as providing continued safe-haven support to the dollar, slowing a dollar down cycle,” said Deutsche Bank strategists Alan Ruskin and George Saravelos.
In commodity markets oil steadied with Brent crude futures at US$84.75 a barrel, supported by nerves that conflict in the Middle East could expand and threaten supply and as Russia and Saudi Arabia reaffirmed production cuts.
Gold nursed modest losses at US$1,972, while bitcoin hovered just shy of US$35,000. — Reuters
