Asian shares fell on Tuesday, as the US Dollar hovered at multi-month-highs. A sharp drop in bond prices and an increase in gold price indicate growing investor caution in advance of the US presidential election.
The benchmark 10-year Treasury yields rose 11 basis points over night and then continued to rise by one bp during early Asian trading. They now stand at 4.19%.
Gold reached a record-high of $2,740 an ounce Monday, before falling to $2,725 on Tuesday.
Japan’s Nikkei dropped 1.1% during morning trading, its lowest since early October.
The MSCI Asia-Pacific Index, without Japan, fell 0.8%.
Wall Street’s indexes fell overnight as well, while futures in Asian trading followed the trend.
According to ANZ’s Jack Chambers, the rising oil price, influenced both by the Middle East conflict as well as the death of Hamas Leader Yahya sinwar in recent weeks, has contributed to the volatility on the bond market.
Brent crude futures rose 1.7% Monday, before settling at $73.89 per barrel in Asia.
Reuters reported that Chambers said the market’s instability is a result of concerns about the upcoming US elections, which are just two weeks off.
The focus on U.S. elections and fiscal dynamics may be affecting sentiment, he said. Fiscal consolidation is unlikely, regardless of election results.
Goldman Sachs lowered its target price for Metcash, due to concerns about potential losses in market share.
China’s markets were subdued, as traders anticipated further stimulus from the government to help support a slowing economy.
Hong Kong’s Hang Seng Index and Shanghai Composite index remained mostly flat.
The dollar rose as the currency markets tracked the Treasury market.
The dollar hovered at 150.67 yen per euro, with the euro near its two-month low of $1.0819.
Australian and New Zealand dollar also remain at multi-month highs. They are trading at $0.6655 apiece and $0.6021 apiece.
Analysts suggested the recent dollar rally was due to the anticipation that Donald Trump would win the US Presidential race. This victory is likely to increase inflation and bond yields because of his fiscal and trade policies.
Joe Capurso, a Commonwealth Bank of Australia currency strategist, noted: “With President Trump already priced in, the AUD/USD is facing modest downside risks while a Kamala Harris win could cause a greater market reaction.”
Investors will focus on earnings from major US corporations, such as General Motors and Texas Instruments. Also, Lockheed Martin, Lockheed Martin 3M, Verizon, Lockheed Martin Lockheed Martin are due to report their results later that day.
The post Nikkei, S&P/ASX200, 10-year yields, gold, USD/EUR/JPY, How they perform may be updated as new information becomes available.
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