(Bloomberg) — Asian stocks are set to fall after bonds and shares fell in the US, as another weak sale of Treasuries boosted concern that funding the US deficit will drive up yields at a time when the Federal Reserve is in no rush to cut rates.
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Futures for equity benchmarks in Sydney, Tokyo and Hong Kong all signaled markets will open lower on Thursday. Contracts for US shares also slipped in early Asian trading after the S&P 500 ended Wednesday near session lows, back below 5,300, while the Nasdaq 100 had its worst day since May 1.
Salesforce Inc.’s shares slumped in extended trading after the software giant’s outlook for the current quarter missed estimates. HP Inc. reported revenue that topped estimates, including the first increase in PC sales in two years. Elsewhere, BHP Group abandoned its bid for Anglo American Plc.
Asia faces a light economic data calendar on Thursday, ahead of highly anticipated Chinese monthly business surveys and Tokyo inflation readings due Friday.
US Treasuries fell Wednesday, sending yields higher across the curve, following tepid demand in the $44 billion sale of seven-year securities, the third and final sale of coupon-bearing debt this week. Yields had been edging higher around the globe, rising to multi-month highs in Europe after inflation in Germany quickened more than expected, while a similar read played out in Australian consumer prices.
“The ‘set-up’ right now is quickly becoming a concern,” said Matt Maley at Miller Tabak + Co. “Not only are yields rising again in the US, but they are moving higher in other parts of the world. That is not good news for a stock market that’s trading at 22 times forward earnings.”
A gauge of dollar strength jumped to a two-week high, while the yen fell for a second day to the weakest against the greenback in four weeks. The Japanese currency briefly spiked Wednesday after Bank of Japan policy board member Seiji Adachi acknowledged it’s possible that yen weakness could spur price gains and prompt authorities to consider another rate hike earlier than expected.
Higher Yields
Worries about the US deficit — mixed with other factors — sent long-term interest rates surging in early October, with the yield on the benchmark 30-year Treasury bond touching a 16-year high.
“Bond yields may be moving higher mainly due to supply of bonds and the continued massive deficit — and not because of a concern around inflation or strong economy,” said Eric Johnston at Cantor Fitzgerald.
Why US Deficit Is a Worry Again, and Will Remain So: QuickTake
The US economy expanded at a “slight or modest” pace across most regions since early April and consumers have pushed back against higher prices, the Fed said in its Beige Book survey of regional business contacts.
Fed Chair Jerome Powell and his colleagues have stressed the need for more evidence that inflation is on a sustained path to their 2% goal before cutting the benchmark interest rate, which has been at a two-decade high since July.
Elsewhere, oil retreated with West Texas Intermediate settling below $80. The drop pared Tuesday’s 2.7% gain in the wake of renewed geopolitical risks, including ship attacks in the Red Sea and Israel’s advance into the Gazan city of Rafah.
Corporate Highlights:
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ConocoPhillips agreed to acquire Marathon Oil Corp. in an all-stock deal valuing the company at about $17 billion, extending a major buying spree among the largest players in the US oil and gas industry.
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Exxon Mobil Corp. pledged to be a “forceful advocate” for shareholder rights as it confronts activist investors that the oil giant accuses of abusing the US proxy voting system.
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BHP Group decided against making a firm offer for Anglo American Plc, instead walking away for now from what would have been the biggest mining deal in over a decade.
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Abercrombie & Fitch Co. shares jumped after the retailer blew past first-quarter sales estimates, extending its bounce back from the teen fashion graveyard.
Key events this week:
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Eurozone economic confidence, unemployment, consumer confidence, Thursday
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US initial jobless claims, GDP, Thursday
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Fed’s John Williams and Lorie Logan speak, Thursday
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Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday
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China official manufacturing and non-manufacturing PMI, Friday
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Eurozone CPI, Friday
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US consumer income, spending, PCE deflator, Friday
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Fed’s Raphael Bostic speak, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.2% as of 7:13 a.m. Tokyo time
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Hang Seng futures fell 0.4%
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S&P/ASX 200 futures fell 0.7%
Currencies
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The Bloomberg Dollar Spot Index rose 0.5%
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The euro was little changed at $1.0803
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The Japanese yen was little changed at 157.65 per dollar
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The offshore yuan was little changed at 7.2728 per dollar
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The Australian dollar was unchanged at $0.6610
Cryptocurrencies
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Bitcoin rose 0.2% to $67,551.01
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Ether rose 0.5% to $3,767.37
Commodities
This story was produced with the assistance of Bloomberg Automation.
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