Concerns over the Middle East and a reconsideration of the US rate cut cause Asian stocks to fall.
Stronger-than-expected U.S. retail sales for March further supported predictions that the Federal Reserve is unlikely to be in a rush to decrease interest rates this year, and as a result, Asian markets fell and the dollar rose to more than five-month highs on Tuesday.
China's economy expanded 5.3% year over year in the first quarter of this year, handily exceeding analysts' predictions. Meanwhile, data showed that geopolitical tensions in the Middle East kept risk sentiment in check, driving up the price of gold and oil.
Although China's GDP report was encouraging for policymakers, a number of other March indicators—such as retail sales, industrial output, and real estate investment—showed that demand is still weak, which negatively impacted investor mood.
Market strategist at IG in Singapore, Yeap Jun Rong, stated that given the persistence of weak areas, markets may still be hesitant. "This may inject some uncertainty as to whether the growth momentum can be followed through, as recovery is still very much uneven."
China's blue-chip index sank 1%, reflecting the declines in global markets, and Hong Kong's Hang Seng Index fell 2%.
The broadest MSCI index of Asia-Pacific equities outside of Japan sank more than 2% to a two-month low of 518.03, as stock markets throughout Asia saw severe declines.
With Eurostoxx 50 futures down 1.30%, German DAX futures down 1.15%, and FTSE futures down 1.28%, the gloomy mood is expected to persist throughout Europe.
China's blue-chip index sank 1%, reflecting the declines in global markets, and Hong Kong's Hang Seng Index fell 2%.
The broadest MSCI index of Asia-Pacific equities outside of Japan sank more than 2% to a two-month low of 518.03, as stock markets throughout Asia saw severe declines.
With Eurostoxx 50 futures down 1.30%, German DAX futures down 1.15%, and FTSE futures down 1.28%, the gloomy mood is expected to persist throughout Europe.
Monday's U.S. stock market saw a significant decline as investors were alarmed by a rise in Treasury yields and growing tensions between Iran and Israel. S&P 500 e-mini futures dropped by 0.14%. [.N]
The Israeli people were waiting to hear from Prime Minister Benjamin Netanyahu about his plans in response to Iran's first direct strike on their nation. According to a government source, Netanyahu called a meeting of his war cabinet on Monday for the second time in less than twenty-four hours to discuss how to react to Iran's missile and drone attack over the weekend.
The Israeli people were waiting to hear from Prime Minister Benjamin Netanyahu about his plans in response to Iran's first direct strike on their nation. According to a government source, Netanyahu called a meeting of his war cabinet on Monday for the second time in less than twenty-four hours to discuss how to react to Iran's missile and drone attack over the weekend.
According to Chris Weston, head of research at Pepperstone, "the sound of derisking, deleveraging, hedging, and broad managing of risk exposures has come alive in the markets."
"There is certainly not much in the news flow to inspire risk-taking and there is a growing list of factors to refrain from buying and to manage exposures."
According to the Census Bureau of the Commerce Department, retail sales in the United States increased by 0.7% last month. This was in contrast to the 0.3% increase predicted by analysts surveyed by Reuters. Retail sales are primarily made up of items and are not adjusted for inflation.
The better-than-expected data follows a report released last week that highlighted how stickier inflation is than what markets had anticipated, which forced a sharp retraction of rate cuts this year.
"There is certainly not much in the news flow to inspire risk-taking and there is a growing list of factors to refrain from buying and to manage exposures."
According to the Census Bureau of the Commerce Department, retail sales in the United States increased by 0.7% last month. This was in contrast to the 0.3% increase predicted by analysts surveyed by Reuters. Retail sales are primarily made up of items and are not adjusted for inflation.
The better-than-expected data follows a report released last week that highlighted how stickier inflation is than what markets had anticipated, which forced a sharp retraction of rate cuts this year.
From more than 160 basis points of planned easing at the beginning of the year, traders now predict 45 basis points of cuts this year. According to CME FedWatch Tool, markets are now pricing rate decreases to begin in September rather than June.
Mary Daly, the president of the San Francisco Federal Reserve Bank, stated on Monday that there is "no urgency" to lower interest rates in the United States given the strength of the labour market and economy and the fact that inflation is still higher than the Fed's target of 2%.
The yield on 10-year Treasury notes increased to a five-month high of 4.663% on Monday, and it was at 4.612% during Asian trading hours. [US/]
The higher yields supported the dollar and maintained the yen close to its 34-year lows.
Mary Daly, the president of the San Francisco Federal Reserve Bank, stated on Monday that there is "no urgency" to lower interest rates in the United States given the strength of the labour market and economy and the fact that inflation is still higher than the Fed's target of 2%.
The yield on 10-year Treasury notes increased to a five-month high of 4.663% on Monday, and it was at 4.612% during Asian trading hours. [US/]
The higher yields supported the dollar and maintained the yen close to its 34-year lows.
The dollar index, which compares the value of the US dollar against six competitors, was last at 106.29 after reaching a five and a half month high of 106.39 earlier in the day. The yen dropped to 154.42, raising new concerns about government meddling and remarks. Emerging market currencies also plummeted.
The dollar/yen exchange rate is supported by raised oil prices and predictions of higher-for-longer U.S. interest rates, according to Carol Kong, a currency strategist at Commonwealth Bank of Australia (OTC:CMWAY).
"Should the Ministry of Finance choose to enter the foreign exchange markets and purchase JPY, the dollar/yen is still vulnerable to a significant decline. The longer the JPY declines, the greater the chance that the Bank of Japan may raise interest rates sooner than expected in our views
The dollar/yen exchange rate is supported by raised oil prices and predictions of higher-for-longer U.S. interest rates, according to Carol Kong, a currency strategist at Commonwealth Bank of Australia (OTC:CMWAY).
"Should the Ministry of Finance choose to enter the foreign exchange markets and purchase JPY, the dollar/yen is still vulnerable to a significant decline. The longer the JPY declines, the greater the chance that the Bank of Japan may raise interest rates sooner than expected in our views
Due to growing Middle East tensions, U.S. crude increased 0.64% to $85.96 a barrel while Brent saw a 0.61% daily increase to $90.65. [O/R]
An ounce of spot gold increased by 0.2% to $2,387.05. [GOL/]
An ounce of spot gold increased by 0.2% to $2,387.05. [GOL/]
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