Global stock markets in Asia experienced widespread declines on Thursday, while bond prices fell amid expectations of prolonged higher global interest rates. Investors are eagerly awaiting upcoming inflation data that could provide further insights into future monetary policy decisions.
The U.S. dollar strengthened alongside rising U.S. Treasury yields, while gold prices remained under pressure as expectations grew that the Federal Reserve would refrain from cutting interest rates in the near term.
The recent downturn in global markets reflects ongoing concerns about persistent inflationary pressures across major economies, dampening investor sentiment. Vishnu Varathan, chief economist for Asia ex-Japan at Mizuho Bank, noted, "Hotter-than-expected global inflation appears to be impacting asset markets, with equities and bonds seeing declines, and the USD gaining strength."
Asia-Pacific shares, excluding Japan, fell by 0.5%, following a negative trend from Wall Street, continuing a decline of 1.6% from the previous session. Japan's Nikkei dropped more than 1.5%, while futures for U.S. and European markets also showed losses. EUROSTOXX 50 futures and S&P 500 futures dipped by 0.18% and 0.35%, respectively, with Nasdaq futures sliding by 0.45%.
On Wednesday, a Fed survey indicated that U.S. economic activity expanded modestly from April to mid-May, but firms expressed increased pessimism about the future amid moderate inflationary pressures. Meanwhile, German inflation exceeded expectations in May, rising to 2.8%, ahead of the broader euro zone's forthcoming data.
The highlight of the week will be Friday's U.S. core personal consumption expenditures (PCE) price index report, a crucial gauge monitored by the Federal Reserve for inflation trends. Analysts anticipate it will show steady monthly figures.
Matt Simpson, senior market analyst at City Index, remarked, "Based on current data trends, it's unlikely we'll see a softer-than-expected PCE report on Friday. A stable PCE could be a positive surprise, but any increase could further dampen risk appetite."
U.S. Treasury yields remained elevated on Thursday, partly due to a disappointing debt auction the previous day. The 10-year yield stood at 4.6197%, while the two-year yield held steady at 4.9830%. Bond prices moved inversely to yields.
Japanese government bond (JGB) yields also rose to multi-year highs amid expectations of potential rate hikes by the Bank of Japan. The 10-year JGB yield reached 1.1%, its highest since July 2011.
In China, blue-chip stocks declined by 0.25%, aligning with regional market trends despite an upward revision of China's GDP growth forecasts by the International Monetary Fund for 2024 and 2025. Hong Kong's Hang Seng Index managed a modest gain of 0.17%.
In currency markets, the dollar strengthened, pushing the euro to a more than two-week low of $1.07955. The yen traded at 157.43 per dollar, rebounding from a four-week low. The Australian dollar edged up by 0.1% to $0.6617, following a brief rise driven by data indicating higher-than-expected inflation in April.
Oil prices saw marginal gains, recovering from losses on Wednesday amid concerns over weak U.S. gasoline demand and expectations of sustained high interest rates. Brent crude stabilized at $83.60 per barrel, while U.S. crude rose slightly to $79.25 per barrel. Spot gold declined by 0.2% to $2,334.15 an ounce.
Paraphrasing text from "Reuters" all rights reserved by the original author.
