(Bloomberg) — Asian stocks snapped a three-day winning streak as investors' risk appetite cooled ahead of Federal Reserve Chairman Jerome Powell's speech at Jackson Hole on Friday, mirroring a halt in Wall Street's gains.
Most read articles on Bloomberg
Chinese shares in Hong Kong fell as much as 2% on losses in technology stocks, leading the broader Asian decline. JD.com slumped as much as 12% on reports Walmart Inc plans to sell shares. Shares in Japan and South Korea also fell, ignoring improving export data after an eighth straight day of gains in U.S. stock indexes.
“There was no substantive news to drive cross-asset flows, so positioning and liquidity movements are likely the culprit,” said Chris Weston, head of research at Pepperstone Group. “Overall, risk bulls will find today's move to be modest, but the damage is unlikely to be too deep given that many have successfully traded this move and made sizable gains on the stock indexes.”
Beyond flows and positioning, the recent rally was also fueled by the view that the Federal Reserve was signaling it was close to cutting interest rates, prompting bond traders to take record risks in anticipation of a rally in the Treasury market.
The dollar stabilized after three straight sessions of losses as markets await Wednesday's revised U.S. employment data, FOMC minutes and Chairman Powell's speech for further clues about the size and timing of a rate cut. Emerging Asian currencies such as the Thai baht and Malaysian ringgit edged higher, while the Bloomberg Dollar Spot Index was little changed.
“After the ferocious risk rally of the last two weeks, it's probably time for a breather,” said Alvin Tan, head of Asia currency strategy at Royal Bank of Singapore. “The turbulence at the start of the month is becoming more of a thing of the past. The US dollar has been under a lot of pressure since Monday, which is partly linked to the rise in global risks.”
In Asia, policymakers in Indonesia and Thailand are expected to keep interest rates on hold on Wednesday, pending imminent monetary easing from the Fed and factoring in uncertainty over the power transition.Australian 10-year bond yields were down 6 basis points in morning trading.
Japanese stocks fell as a stronger yen stoked worries about corporate earnings. The yen steadied around 145 yen against the dollar after rising on Tuesday as traders waited for the Bank of Japan governor to speak to parliament on Friday.
The story continues
Property stocks are in focus in China as local governments consider new ways to raise funds by issuing bonds to buy up unsold homes after a series of rescue packages have failed to prop up the market.
The S&P 500 fell below 5,600 on Tuesday as Nvidia led the decline in large caps after rising nearly 25% in six days. The 10-year Treasury yield was little changed after falling 6 basis points. Brent crude oil fell for a third straight day on growing concerns about a possible ceasefire in Gaza and the global demand outlook, while gold hit a record high.
Dan Wantrobski of Janney Montgomery Scott expects stock markets to remain strong in the near term, but he's “being cautious” about the possibility of a bigger correction between August and October.
“So what happens when everything and everyone is primed to be bullish,” Wandrobski said. “From a timing standpoint, we are heading into a period where a liquidity event is likely. And the charts, trader positions, and sentiment are all very fragile right now in our view. We are smelling a 'bull trap' ahead. But we are hoping we are wrong.”
Major events this week:
Federal Reserve Board minutes, BLS annual employment report provisional revision, Wednesday
Eurozone HCOB PMI, Consumer Confidence, Thursday
ECB to publish report on July interest rate decision on Thursday
U.S. initial jobless claims, existing home sales, S&P Global PMI on Thursday
Japan Consumer Price Index, Friday
Bank of Japan Governor Kazuo Ueda is due to attend an extraordinary session of the Diet on Friday to discuss a July 31 interest rate hike.
U.S. new home sales Friday
Federal Reserve Chairman Jerome Powell spoke at the Jackson Hole Symposium in Wyoming on Friday.
Some of the key market developments:
stock
S&P 500 futures were little changed as of 10:45 a.m. Tokyo time.
Japan's TOPIX falls 0.8%
Australia's S&P/ASX 200 fell 0.4%
Hong Kong's Hang Seng Index fell 1.2%
The Shanghai Composite Index fell 0.4%
Euro Stoxx 50 futures little changed
Nasdaq 100 futures little changed
currency
The Bloomberg Dollar Spot Index was little changed.
The euro was little changed at $1.1121
The Japanese yen weakened 0.1% to 145.44 yen to the dollar.
The offshore yuan weakened 0.1% to 7.1248 yuan per dollar.
The Australian dollar was little changed at $0.6746
Cryptocurrency
Bitcoin fell 0.3% to $59,140.96.
Ether fell 0.4% to $2,578.49.
Bonds
The yield on the 10-year Treasury note was little changed at 3.81%.
Japan's 10-year government bond yield fell 2 basis points to 0.870%.
Australia's 10-year government bond yield fell 6 basis points to 3.89%.
merchandise
This story was produced with assistance from Bloomberg Automation.
–With assistance from Rita Nazareth.
Most read articles on Bloomberg Businessweek
©2024 Bloomberg LP
