GLOBAL MARKETS – Asian stocks fall ahead of US CPI, crypto worries rise
By Stella Qiu
SYDNEY, Nov 10 (Reuters) – Asian stock markets were tense on Thursday and the dollar held on to overnight gains ahead of the big test of a U.S. consumer inflation report, while market sentiment took a dive as the likely collapse of a major crypto exchange spooked investors.
With no final results available from the US midterm elections, investors turned to upcoming inflation data later in the day, which is likely to show a decline in both the monthly and annual core figures for October to 0.5% and 6.5%, according to a poll from Reuters.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6% in early trade, dragged down by outsized declines in China’s bluechips and Hong Kong’s Hang Seng index.
Japan’s Nikkei lost 1 percent.
China is again grappling with a wave of COVID, with the southern metropolis of Guangzhou reporting thousands of cases. Apple Inc supplier Foxconn plans to update its fourth-quarter outlook on Thursday, after strict COVID curbs remained in place at its main plant in China despite the lifting of a lockdown.
Elsewhere, the focus remained on inflation.
“While inflation globally has peaked, the cooling is not sufficiently large or broad-based to bring rate hike cycles to a convincing conclusion, in our view,” analysts at JP Morgan said.
Still, some central banks in both developed and emerging markets had dove as they worried monetary tightening would drag down economic growth, the analysts noted.
The futures market currently shows that investors believe the target US federal funds rate will peak around 5.1% by June next year, tipping the odds for a 50 or 75 basis point increase in favor of a half-point increase next month.
Overnight on Wall Street, stocks finished lower as Republican gains in the midterm elections appeared more modest than some had expected. Republicans were still favored to win control of the House of Representatives, but key races were too close to call.
In the crypto world, bitcoin bounced back somewhat in early trading on Thursday, after falling for two straight sessions to its lowest level since late 2020.
Binance, the world’s largest crypto exchange, said late Wednesday that it had decided not to buy smaller rival FTX, which has been struggling with a severe liquidity crisis and faced bankruptcy without more capital.
“You can’t deny the growing correlation between bitcoin and risk assets. The FTX news has an outsized effect on asset prices,” said Stephen Innes, managing partner at SPI Asset Management.
“Bitcoin spillovers are not insignificant, and given how widely cryptocurrencies are held, it could mean more forced liquidation of other assets to cover margin calls as long investors were massively wrong-footed.”
The US dollar on Thursday held most of its overnight gains against a basket of currencies.
Sterling rose 0.2% against the dollar, after falling 1.6% in the previous session.
US Treasury yields were lower on Thursday.
The yield on the benchmark 10-year note fell 6 basis points to 4.0866%, while the yield on 2-year notes fell 5 basis points to 4.5732%.
In commodities, oil prices continued to retreat on Thursday, after falling around 3% in the previous session on fears of demand from China and rising US crude inventories.
U.S. crude futures fell 0.3% to $85.59 a barrel, while Brent crude futures fell by a similar margin to $92.37.
Gold was little changed, with the spot price at $1,705.92 an ounce.
(Reporting by Stella Qiu; Editing by Bradley Perrett)
