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Asian shares managed to recover some ground, paring losses, while European stock futures indicated a weak open amid concerns of a potential overreaction to soft US inflation data that drove gains earlier in the week. The MSCI Asia Pacific Index reduced earlier declines of up to 0.8%, interrupting a three-day winning streak. Chinese shares in Hong Kong led the losses among major Asian equity gauges due to a rapid decline in home prices and unimpressive outcomes from the Xi-Biden summit. European futures fell by 0.2%, despite US futures reversing an initial 0.3% drop.
Analysts are cautious, pointing out that US equity markets are approaching overbought levels, signaling a potential pullback. Tony Sycamore, a market analyst at IG Australia, warned that the recent easing in financial conditions might not sit well with the Federal Reserve’s higher-for-longer message.
This week’s rally in US stocks and Treasuries following soft inflation data has raised concerns about premature expectations of a dovish Fed. The S&P 500 has surged over 7% in November, prompting expectations of some profit-taking and consolidation, according to George Boubouras, head of research at K2 Asset Management.
Treasuries experienced gains in Asia after a selloff on Wednesday, where the 10-year rate rose above 4.5%. The US dollar pulled back slightly from its daily high but still traded 0.1% higher.
In the property sector, a Bloomberg gauge initially recorded losses after a 1.4% dip following weak housing data. Hong Kong’s technology stocks fell over 2%, influenced by a selloff in Xiaomi and Tencent, erasing gains of up to 2%. Investors are now awaiting corporate earnings from Alibaba Group Holding Ltd. and NetEase Inc. later today.
Traders are also evaluating China President Xi Jinping’s statement that his country has no intention of engaging in a cold or hot war with the US, interpreting it as a sign of Beijing’s effort to mend recent strained relations. Moody’s Investors Service downgraded the US’s credit-rating outlook to negative from stable last Friday, citing increasing risks to fiscal strength and political polarization in Congress.
Key events this week include US initial jobless claims, industrial production, Walmart earnings, and speeches from various Federal Reserve officials. US Congress faces a midnight deadline to pass a federal spending measure.
Some of the notable moves in the market:
Stocks:
- S&P 500 futures were largely unchanged.
- Nasdaq 100 futures declined 0.1%.
- S&P/ASX 200 futures rose 0.1%.
- Japan’s Topix fell 0.2%.
- Hong Kong’s Hang Seng fell 1%.
- The Shanghai Composite fell 0.5%.
- Euro Stoxx 50 futures fell 0.2%.
Currencies:
- The Bloomberg Dollar Spot Index remained stable.
- The euro fell 0.1% to $1.0837.
- The Japanese yen was mostly unchanged at 151.34 per dollar.
- The offshore yuan saw little change at 7.2632 per dollar.
Cryptocurrencies:
- Bitcoin fell 0.4% to $37,486.48.
- Ether rose 0.4% to $2,056.33.
Bonds:
- The yield on 10-year Treasuries declined four basis points to 4.50%.
- Australia’s 10-year yield advanced two basis points to 4.55%.
Commodities:
- West Texas Intermediate crude fell 0.7% to $76.14 a barrel.
- Spot gold rose 0.2% to $1,963.84 an ounce.
