South Korea’s KOSPI fell 3 per cent at the open on Sept 2. Japan’s Nikkei 225 sank 2.2 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.8 per cent in early trading, after a panic in the bond market spread from global markets into the region.
Oil was part of the story. The United States launched airstrikes on Iran on Sept 1, which pushed oil to a five-week high. When Asian trading resumed, Brent crude futures kept climbing for a second day, up 0.7 per cent at US$95.34 a barrel.
Westpac analysts tied the two together. “The threat of further disruptions to the Strait of Hormuz has brought about renewed anxiety over inflation, driving a selloff in stocks across most major markets and a rout in global bond markets,” they wrote.
The US 10-year Treasury yield stood at 4.798 per cent, up 0.4 basis point. The US dollar index held near its highest in two weeks, at 99.67. S&P 500 e-mini futures were flat.
Wall Street had already slid the night before. The S&P 500 slipped 0.7 per cent and the Nasdaq Composite fell 1 per cent as surging government bond yields weighed on shares. Data from the Institute for Supply Management, released on Sept 1, showed US manufacturing activity cooled in August as new orders slowed, though it stayed in expansionary territory.
Traders expect the Federal Reserve to raise rates at its next meeting, two weeks away, though a hike is not certain. Fed funds futures put the probability of a 25-basis-point increase at 67 per cent, up from 39.6 per cent a week earlier, according to the CME Group’s FedWatch tool. The Fed’s two-day meeting ends on Sept 16.
Gold was flat at US$4,328.59 an ounce. Bitcoin slipped 0.2 per cent to US$77,246.57, and ether lost 0.3 per cent to US$2,412.60.
