It was a bit of a rough day in the land of Asian stocks this Thursday. Why, you ask? Well, U.S. bond yields decided to reach new nine-month heights, which got the U.S. dollar all pumped up. Meanwhile, investors were on tenterhooks, keeping a keen eye on whether Apple and Amazon’s performance can justify the tech sector’s astronomical valuations.
Looking across the pond, it seemed Europe was in for a slow start. EUROSTOXX 50 futures were down by a smidge at 0.1%, while FTSE futures nudged up a bit by 0.2%. All ears were on the Bank of England, which was tipped to hike up interest rates later in the day.
Stateside, both the S&P 500 and Nasdaq futures weren’t budging, especially after Wall Street witnessed a selling spree. Investors were cashing in their chips after a fruitful five-month run, particularly after Fitch brought down the hammer on the U.S. government’s credit rating.
Back in Asia, the MSCI index of Asia-Pacific shares (excluding Japan) took a 0.2% tumble, following a hefty 2.3% fall just a day before. However, it’s not all gloom as it came off the back of a respectable 5.4% monthly gain in July.
Meanwhile, Japan’s Nikkei was down in the dumps, sliding by 1.3% and clocking a 2.7% loss so far in August. This was a bit of a reality check after its impressive 7.5% rally in the previous month.
Now, onto bonds. The 10-year Japanese government bonds (JGB) yield shot up briefly to 0.6550%, a level not seen since April 2014. Alarmed, the Bank of Japan jumped into action, buying up bonds to prevent the yield from climbing any higher. The last reported yield was a slightly lower 0.645%.
Over in the U.S., the long-term Treasury yields kept scaling new heights on Thursday. This surge was spurred by some surprisingly robust private employment data and the announced refunding of Uncle Sam’s maturing debt.
“I reckon even though you could argue the Fitch downgrade is old news… we’ve seen enough to ask some tough questions at these record highs,” noted Matt Simpson, a market analyst at City Index in Brisbane. He added, “I’d wager that, at best, we’re looking at some uneven trading around these highs or, at worst, a more substantial pullback.”
Over in China, their blue-chip stocks rose a respectable 0.5%, while Hong Kong’s Hang Seng index nudged up by 0.2%. This was courtesy of a private survey showing an acceleration in China’s services activity in July, a silver lining for the struggling economy. However, this was in contrast to a drop in official surveys.
“More patience is preferred at this moment,” advised analysts at Morgan Stanley, having downgraded Chinese shares due to persistently negative earnings revisions and subpar returns on equity and profit margins.
As the day went on, Apple was bracing for the largest third-quarter dip in revenues since 2016 due to slowing iPhone sales. Amazon, a good gauge for consumer spending, was anticipated to report a healthy 8% bump in second-quarter revenue, thanks to a revival in its advertising and e-commerce arms.
Finally, the U.S. dollar was strutting its stuff in Asia, reaching a one-month high against major currencies. This came off the back of strong private payrolls data, indicating the U.S. labor market’s resilience. Keep your eyes peeled for the U.S. nonfarm payrolls report out on Friday!
And there you have it, folks! From stocks and bonds to currencies and commodities, that’s your world financial news wrap for today. Remember, the market is a roller coaster ride. So, buckle up and hang tight!