Asia stocks mixed, oil extends fall on weak demand: markets wrap
Stocks in Asia traded mixed on Wednesday with oil extending declines following a report indicating American gasoline demand will drop.
A gauge of the region’s equities was little changed, as Chinese benchmarks fluctuated between gains and losses. Treasuries steadied in Asian trading after bets on a Fed pivot next year sent bond rates sharply down Tuesday. 10-year yield fell below 4.6% as traders dismissed hawkish comments from Federal Reserve officials. US equity futures were little changed.
Oil tumbled to a three-month low as a forecast drop in US gasoline consumption added to a growing array of indicators suggesting the demand outlook is worsening. China, the world’s biggest importer, is also seeing dimming oil demand as winter approaches.
“A drop in oil prices is due to concerns about a stagnant demand against a backdrop of uncertainty about the global economy,” said Rina Oshimo, senior strategist at Okasan Securities. “There’s a noticeable decline mainly in economically sensitive stocks such as trading companies, steel, and marine transportation.”
Global equities are poised for a double-digit rally in 2024 if the Fed pivots its monetary policy and allows the economy to avoid a recession, according to HSBC Holdings Plc strategists. The S&P 500 rose in price an average 13% in the nine months after the last rate hike in the past three decades, said Sam Stovall, chief investment strategist at CFRA and author of “The Seven Rules of Wall Street.”
Chinese equities whipsawed after falling yesterday on the nation’s trade data yesterday. Beaten-down Chinese equities may have an opportunity for gains with the possible upcoming meeting between leaders of the US and China next week, according to the chief investment officer of Templeton Global Equity Investments.
Elsewhere, the bond market is betting on a “dovish pivot” for the seventh time since the Federal Reserve and other central banks embarked on a tightening cycle, raising the prospect of another false dawn, according to Deutsche Bank macro strategist Henry Allen. Australia’s 10-year yield declined after the central bank signalled a higher hurdle to further policy tightening on Tuesday.
Fed Bank of Minneapolis president Neel Kashkari said policymakers have yet to win the fight against inflation and they will consider more tightening if needed. His Chicago counterpart Austan Goolsbee said officials don’t want to “pre-commit” decisions on rates.
Several of the US central bank’s more hawkish policy makers signalled that the cumulative tightening of financial conditions since July — with yields on 10-year Treasury bonds up more than 100 basis points — could have a dampening effect on the economy, though they want more time to see if it will last. Fed governor Christopher Waller called the run-up in yields an “earthquake” for the bond market.
The US dollar strengthened for a second day on Tuesday with all G10 peers underperforming against the greenback. Gold was little changed after dropping to a two-week low.