EQUITIES
Asia-Pacific stocks fell in Wednesday morning trade following an overnight tumble on Wall Street. The Japan's Nikkei led the decline regionally as it shed 2.68%, also hurt by the general mood as the country's ruling party votes for a new leader.
South Korea’s KOSPI declined 2.05%, the Australia’s S&P/ASX 200 dipped 1.21%, and the S&P BSE Sensex in India slipped falling 0.46%.
Hong Kong’s Hang Seng index dropped 0.45%, and the mainland Chinese stocks Shanghai composite shed 1.79%. the Straits Times index in Singapore little changed from the opening.
Overnight, all three major U.S. stock indexes slid more than 1.5%, with interest rate sensitive tech and tech-adjacent stocks worst hit by the surging yields. The Dow Jones Industrial Average fell 1.63%, to 34,299.53, the S&P 500 lost 2.04%, to 4,352.61 and the Nasdaq Composite dropped 2.83%, to 14,546.68.
OIL
Oil prices eased on profit taking, as the Brent crude pulled back from a three-year high above $80 and WTI retreated toward $74 a barrel. Market sentiment remained strong with tighter supply and recovering demand with the easing of COVID-19 pandemic restrictions.
The Brent now traded at $77.92 per barrel, while U.S. crude futures traded at $74.15 per barrel.
Overnight, the Brent ends at $79.09 a barrel, and the WTI at $75.29 per barrel.
CURRENCIES
U.S. Treasuries extended their sell-off into a fourth day with the 10-year yield reaching a level last seen in mid-June. European bond yields also soared.
The benchmark U.S. 10-year Treasury yields have gained 25 basis points in five sessions and were last at 1.548%, having hit their highest since mid-June the day before, while the dollar index was at 93.716, hovering near a more than 10-month high, also touched on Tuesday.
The rise in yields was driven by the fact that the U.S. was almost definitely going to start tapering its massive asset purchases by the end of this year.
GOLD
Gold prices crawled up on Wednesday, although still held close to a seven-week trough on growing expectations of a quicker-than-expected U.S. rate hike that pushed the dollar to a multi-month high.
Spot gold rose 0.25% to $1,738.20 per ounce, edged higher after the price fell to their lowest level since Aug. 11 to $1,726.19 overnight. The U.S. gold futures edged 0.12% higher to $1,739.50 per ounce.
Silver rose 0.21% to $22.51 per ounce, platinum edged up 0.67% to $968.30, while palladium gained 1.45% to $1,881.00.
ECONOMIC OUTLOOK
Asian shares lost ground on Wednesday, tracking declines on Wall Street as investors fretted over inflation concerns that caused a spike in U.S. benchmark bond yields and pushed the dollar to a more than 10-month high.
Banking and technology stocks are hit in an environment of rising yields. Tech stocks in Asia slipped, with shares of Japanese conglomerate Softbank Group falling 2.40% and South Korea’s Samsung Electronics dropping 2.55%. Chinese tech shares in Hong Kong also declined, with Tencent plunging 3.32% and Alibaba slipping 2.98%. The Hang Seng Tech index fell 3.18%.
Mounting concern over the debt-ceiling impasse in Washington added to investor angst. During a Senate hearing, Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen both warned that a U.S. default due to a failure to raise the debt ceiling would have catastrophic consequences. Republicans blocked a Democratic move in the Senate to raise the debt limit.
Additionally, in his testimony before the U.S. Senate Banking Committee, Powell said the U.S. economy is still far from achieving maximum employment, a key component of the central bank’s requirements for raising interest rates. U.S. consumer confidence dropped in September for a third straight month, suggesting concerns over the Delta variant and higher prices continue to dampen sentiment.
Meanwhile, China Evergrande Group is facing another bond interest payment after giving no sign that it had paid a separate one last week, as its deepening debt crisis looms over global markets and highlights funding risks for other developers.
TECHNICAL OUTLOOK
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 111.813 and 112.095.
- Support line of 110.898 and 110.615.
Commentary/ Reason:
The yen touched an 18-month low of 111.513 per dollar.
The pair on Wednesday skyrocketed as it extends its week-long rally. The yen, which is sensitive to U.S. yields as higher rates can draw flows from Japan, was under pressure on higher T-note yields after the 10-year T-note yield climbed to a 3-1/4 month high.
Investors next awaited the Japanese ruling party’s leadership election that will decide the country’s next prime minister later today.
The USD/JPY pair is now testing a recent price ceiling at the 111.813 resistance line. Selling pressure started to rise as the pair getting a bit overstretched. Previous tests of this price area have resulted in a pullback in the past. Bearish rebound hints heading to decline to achieve negative targets that start at 110.898.
