Asian Equities Rise as Dollar Eases Ahead of Economic Data
Asian equities saw a slight increase on Tuesday, inching closer to their lowest levels since November 2022. Meanwhile, the dollar eased as traders remained cautious ahead of economic data that is expected to shed light on the future actions of the U.S. Federal Reserve.
In the oil market, prices rebounded slightly following concerns that the ongoing Israel-Hamas conflict could escalate into a wider conflict in the oil-exporting region.
The MSCI broadest index of Asia-Pacific shares outside Japan recovered from earlier losses, trading 0.41% higher at 476.72. However, it remains down 3% for the month, marking its third consecutive month in the red. Japan’s Nikkei also saw a rebound, rising 0.21% after a previous slide of 1.4%.
In Europe, futures indicated a lower opening for stocks, with Eurostoxx 50 futures down 0.10%, German DAX futures down 0.11%, and FTSE futures 0.16% lower.
The fear of inflation continues to loom, especially with the recent surge in oil prices, according to Gary Dugan, Chief Investment Officer at Dalma Capital. If oil prices remain at their current levels throughout 2023 and into 2024, it could potentially inject another wave of inflation into the global economy.
Investor focus this week will be divided between the earnings reports of major companies such as Microsoft, Meta Platforms (formerly Facebook), and Amazon, as well as a slew of economic data leading up to the Fed’s meeting from October 31 to November 1. Key data to watch includes the U.S. Commerce Department’s announcement of third-quarter gross domestic product on Thursday and the release of the Personal Consumption Expenditures (PCE) report, which is the U.S. central bank’s preferred inflation gauge, on Friday.
Before those events, investors will be analyzing the flash purchasing managers’ index (PMI) data from Britain, France, the Eurozone, and the United States, which is expected to be released later on Tuesday.
The upcoming data releases are significant as they precede central bank meetings over the next two weeks. The European Central Bank (ECB) is expected to keep rates unchanged at its meeting on Thursday, reflecting the lingering weakness in the European economy.
China shares remained under pressure, with Hong Kong’s Hang Seng Index sliding 0.68%. In contrast, the Shanghai Composite Index rose 0.32%. China’s blue-chip CSI300 Index held steady after closing on Monday at its lowest level in 4-1/2 years, despite efforts by state fund Central Huijin to support the declining market.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note was up 0.80 basis point at 4.846% in Asian trading on Tuesday. The recent increase in Treasury yields, which are seen as a safe haven during times of economic uncertainty, has been driven partly by investors anticipating stronger U.S. growth.
Billionaire investor Bill Ackman revealed that he had covered his previous bets against Treasuries in light of the Israel-Hamas conflict, as he expects more investor funds to flow into U.S. Treasuries.
The dollar remained relatively weak against a basket of currencies, following a 0.5% drop on Monday. The dollar index decreased by 0.076% to 105.52. The Japanese yen, although still under pressure, found some relief from the retreat of the dollar. The yen was last at 149.74 per dollar after briefly hitting 150 on both Friday and Monday, which has the potential to trigger intervention by authorities to support the currency.
In the cryptocurrency market, bitcoin regained popularity due to speculation surrounding the possibility of an exchange-traded fund (ETF), leading short-sellers to exit their positions. Bitcoin reached as high as $35,198, an 18-month peak, before settling at $34,427, marking a 4% increase for the day.
In the commodities market, U.S. West Texas Intermediate crude futures rose 0.32% to $85.76 per barrel, while Brent crude was up 0.33% at $90.13. Additionally, spot gold increased by 0.2% to $1,975.49 an ounce.
Editing by Jamie Freed and Clarence Fernandez