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© Reuters. File photo: A broker photographed near a computer screen, showing the stock market since the opening of the Colombo Stock Exchange in the morning on February 6, 2014. REUTERS/Dinuka Liyanawatte/File Photo
Author: Wayne Cole
SYDNEY (Reuters)-Asian stock markets plummeted on Wednesday, as risk aversion boosted bonds and the U.S. dollar, while investors awaited the minutes of the Fed’s last meeting, which should highlight the tough turn in US monetary policy.
It is difficult for dealers to find a single catalyst for a sudden shift in mood, but China’s suppression of technology companies has clearly had an impact.
The Hong Kong stock market fell another 1% to a nearly six-month low, while Didi Global Inc, a US-listed ride-hailing service company, fell more than 20% in New York. Alibaba (New York Stock Exchange:) Group
The MSCI Asia Pacific’s broadest index outside Japan fell slightly by 0.4%, while falling 0.9%.
On the other hand, the Australian stock market managed to rise 0.6%, and Chinese blue chip stocks rose 0.2%.
Nasdaq futures and are currently stable.
A survey showed that the hot American service industry has cooled slightly, which disturbed Wall Street, although the ISM index is still at 60.1, which is still at a record high.
“Normally, any ISM reading close to 60 or higher will be considered strong, but the details show that there is a speed limit to the recovery when input and labor shortages and costs are still high,” senior foreign exchange analyst Rodrigo Catril said. Strategist at NAB.
Uneasy sentiment helped US Treasury bonds continue the recent rally, and the yield on US 10-year Treasury bonds fell nearly 8 basis points overnight to 1.348%. This is the lowest level since February and the biggest one-day drop since February.
The outstanding performance of long-term bonds has led to a flattening of the yield curve bull market, which may be a bet that the Fed will preemptively tighten policy to curb inflation.
The minutes of the Fed’s June policy meeting to be announced later on Wednesday may show how serious members are about reducing asset purchases and how to start raising interest rates early.
The anticipation of the hawkish tone helped the U.S. dollar rise to 92.543 from Tuesday’s low of 92.003 against a basket of currencies. The euro fell back to $1.1823, close to its lowest level since March, while commodity-related currencies fell.
The dollar’s luck against the safe-haven yen fell to 110.45.
“We now expect the U.S. dollar to generally strengthen for a period of time in the next few quarters,” said Kim Mundy, senior foreign exchange strategist at CBA.
“Our view comes down to the fact that the U.S. economy has performed well over a period of time, so we lowered our recent forecasts for all currencies we monitor against the U.S. dollar.”
In the commodity market, the rebound in the US dollar offset the prevailing risk aversion, with gold stabilizing at US$1,801 per ounce after briefly hitting US$1,814 per ounce overnight.
After OPEC’s oil-producing countries cancelled the meeting because the major oil-producing countries failed to reach an agreement on increasing supply, oil prices have recently fallen.
Analysts at NatWest Markets said that failure to reach an agreement to expand production is good for prices in the short term, but it may become a burden over time.
They stated in a report: “The lack of agreement among the major oil-producing countries will at least lead to the risk of the collapse of the entire OPEC+ agreement, causing major oil-producing countries to substantially increase production at a faster rate.”
It fell 18 cents to US$74.35 per barrel in early trading on Wednesday, and fell 10 cents to US$73.27 per barrel.
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