As Traders Avoid Risk, Stocks Fall & Dollar Rises – Asia Market Wrap
Global equities edged lower in holiday-thinned trading as investors assessed whether a 60-day diplomatic window between the US and Iran could pave the way for a broader nuclear agreement and a more durable peace settlement.
MSCI’s global equity index fell 0.2%, trimming weekly gains, while an Asian stock gauge slipped 0.9% after a five-day rally that had carried the benchmark to record highs. S&P 500 futures declined 0.5% following Thursday’s 1.1% advance, and the Dollar strengthened against most major peers as investors adopted a more cautious stance heading into the weekend. Market liquidity was reduced by holiday closures across the US, China, Hong Kong and Taiwan.
Brent crude traded below $80/bbl and was on course for a weekly decline of roughly 9%. The sharp drop reflects easing concerns over global energy supplies after the US-Iran interim peace agreement helped restore shipping activity through the Strait of Hormuz, unwinding much of the conflict-related risk premium in oil markets.
Bond yields moved higher across parts of the Asia-Pacific region, with 10-year Japanese and Australian yields advancing. In the US, two-year Treasury yields steadied around 4.18% after surging 13 bps in the previous session to their highest level in more than a year as traders increased bets on future Fed tightening following the central bank’s hawkish hold.
Gold was on track for a third consecutive weekly loss as expectations for higher interest rates outweighed optimism surrounding the peace agreement. Adding to the pressure, Goldman Sachs cut its year-end gold price forecast by $500/oz, reflecting a less supportive outlook for the precious metal amid rising real yields and a stronger Dollar.
