© Reuters. A passerby walks past an electric monitor displaying the stock price index of various countries in front of a bank in Tokyo, Japan, March 22, 2023. REUTERS/Issei Kato/File Photo
By Wayne Cole
SYDNEY (Reuters) – Asian stocks steadied on Wednesday after Chinese economic data suggested Beijing’s stimulus measures may finally be taking effect, although an explosion at a Gaza hospital dealt a blow to hopes of containing the conflict there.
Global bond markets also continued to post heavy losses as strong US retail data pointed to a punishingly long period of high interest rates.
The global economic outlook took a slight turn for the better as China reported annual economic growth of 4.9% in the third quarter, beating forecasts of 4.4%.
September retail sales and industrial production also surprised positively, suggesting activity has picked up momentum.
This helped Chinese blue chips pare early losses, falling 0.2%, although the overall initial reaction was muted.
The mood had darkened as Israeli and Palestinian authorities traded blame for the blast that killed hundreds of people at a Gaza hospital, complicating U.S. President Joe Biden’s already difficult trip to the region.
The news contributed to a rise in oil prices as investors feared Iran or other countries could get involved.
“We believe there is a risk of the Israel-Hamas conflict escalating and spreading to other countries in the Middle East,” CBA analysts warned in a note. “A significant increase in volatility and a deterioration in the global economic growth outlook are possible.”
The cautious sentiment sent MSCI’s broadest index of Asia-Pacific shares outside Japan down slightly, falling 0.2%.
EUROSTOXX 50 futures fell 0.2% while remaining flat. and Nasdaq futures both fell 0.2%.
Tech stocks were hurt in part by a decline in Nvidia (NASDAQ:) following news that the Biden administration plans to halt shipments of more of its advanced artificial intelligence chips to China.
Markets are now eagerly awaiting results from Netflix (NASDAQ:) and Tesla (NASDAQ:) later in the session.
Stocks also came under pressure from a rise in bond yields after a head-turning report on U.S. retail sales in September prompted analysts to revise their economic growth forecasts for both the third and fourth quarters.
JPMorgan raised its growth forecast from 3.5% to an annualized 4.3%, while the Atlanta Fed’s influential GDPNow forecast rose to a heady 5.4%.
Markets responded by pricing in a higher risk that the Federal Reserve will be forced to raise interest rates again. There is still only an 11% chance of a change in November, but in January the probability increased from 37% to 50%.
The market also once again reduced expectations of rate cuts soon, with no chance of a rate cut until June and around 54 basis points of easing being implied for the whole of 2024.
Bonds have fared badly, with two-year bond yields rising as much as 14 basis points on Tuesday to a 16-year high of 5.24%. The two-year bond yield was recently at 5.20%, while the 10-year bond yield was back near recent highs at 4.84%.
The rise spread to the world’s bonds, and the Bank of Japan was forced to conduct an unscheduled operation to buy Japanese government bonds to contain a rise in yields.
Further comments from the Fed are likely on Wednesday, with as many as five officials scheduled to speak before Chairman Jerome Powell appears on Thursday. [FED/DIARY]
The rise in yields supported the US dollar, particularly in the low-yielding Japanese yen, where the dollar hit 149.74 and again faced major resistance at 150.00.
The euro fell slightly to $1.0573, from $1.0595 on Tuesday.
Safe-haven inflows pushed gold prices up 0.9% to $1,940 an ounce, well above its recent low of $1,809.
Oil prices rose again, driven by worries about the Middle East and data showing a decline in crude inventories.
rose $2.16 to $92.06 a barrel, while it rose $2.30 to $88.96 a barrel.
Source : www.investing.com