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Asian markets hit by interest-rate cut uncertainty

Asian stocks cautious amid European political uncertainty
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May 30, 2024 (MLN): Stocks, currencies, and bonds across Asia slumped on Thursday, as US Treasury yields near this year’s high underscored uncertainty over the timing of interest-rate cuts, as Bloomberg reported.

Japanese and South Korean equities led losses in the region, with the MSCI Asia Pacific Index down to its lowest in three weeks. Futures contracts for US stocks also slipped in Asian trading.

Treasuries steadied after falling across the curve in the previous session following tepid demand in the $44 billion sale of seven-year securities.

The result boosted worries that funding the US deficit will drive up yields at a time when the Federal Reserve is in no rush to cut rates. Japanese, Australian and New Zealand debt tracked the moves early Thursday.

“Strong year-to-date performance is now facing increasing uncertainty heading into summer,” said Kieran Calder, head of Asia research at Union Bancaire Privee, referring to stocks.

Calder foresees more profit taking as investors await key economic data in the US on Friday and a monetary policy decision in Europe next week.

Rising Treasury yields have driven the dollar higher, in turn hitting Asian currencies.

A gauge of dollar strength gained for the third session. Global equities are on pace for their worst week since mid-April.

In Japan, the yen advanced after weakening as much as 0.3% to beyond 157.52 per dollar on Wednesday, falling through a level that had prompted the latest round of suspected action.

Elsewhere, China’s onshore yuan was little changed after falling to the lowest level since November on Wednesday.

South Africa’s rand weakened 0.4% against the dollar Thursday as the country went to polls to elect its next parliament and government.

“Bond yields may be moving higher mainly due to supply of bonds and the continued massive deficit — and not because of a concern around inflation or strong economy,” said Eric Johnston at Cantor Fitzgerald.

In New Zealand, the new government delivered on its election promise to cut taxes in its first budget even as the Treasury forecast bigger deficits and a delayed return to surplus.

In the corporate world, BHP Group decided against making a firm offer for Anglo American Plc, instead walking away for now from what would have been the biggest mining deal in over a decade.

Google committed to making $2 billion in investments in Malaysia.

In commodities, oil was steady after falling on Wednesday as traders look to US stockpile data and an OPEC+ meeting on the weekend.

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Posted on: 2024-05-30T09:47:36+05:00