Asian Equity Futures Decline as Risk Tone Falters: Markets Wrap
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2023-08-23 07:49
Asian equity futures declined as Wall Street’s risk-on mood faded a day after the rally in big tech.

Asian equity futures declined as Wall Street’s risk-on mood faded a day after the rally in big tech.

Stock traders are awaiting Nvidia Corp.’s results later Wednesday, which are set to test the fervor around the artificial-intelligence hype, while wider markets are marking time ahead of a speech from Federal Reserve Chair Jerome Powell on Friday.

Contracts for Japanese shares dropped 0.6%, those for Hong Kong slipped 0.5% and futures for Australia’s benchmark eased 0.2%. Elevated bond yields continue to cause concern, even as moves moderated on Tuesday.

The 10-year Treasury rates were little changed after benchmark yields hit an almost 16-year high Monday as the resilient economy has investors positioning for the Federal Reserve to keep borrowing costs elevated.

The S&P 500 extended its August slide, with banks dropping as S&P Global Ratings joined Moody’s Investors Service in cutting some US lenders amid a “tough” climate. Macy’s Inc. sank 14% as credit-card delinquencies accelerated, raising a red flag about consumer health. Nvidia fell 2.8% on the eve of its quarterly report.

In a sign of how significant Nvidia’s results will be, the options market is bracing for a move of about 10% following the results. With Nvidia accounting for over 3% of the S&P 500, the stock action will possibly have broader implications. The shares briefly touched an all-time high on Tuesday.

Meanwhile, the surge in US yields has been the primary reason stocks have declined over the past several weeks, with investors “pushing out” the date of expected rate cuts as they begin to accept the Fed may keep rates “higher for longer,” according to Tom Essaye, founder of “The Sevens Report” newsletter.

“It’s not the height of rates that matters as much as how long they stay high,” Essaye noted. “If we see Powell hint at higher for longer on Friday, we will need to brace for more equity market volatility.”

Powell is set to speak Friday at the Kansas City Fed’s Jackson Hole Economic Policy Symposium. Investors will look to the highly anticipated speech for clues on the outlook for interest rates, which the Fed last month lifted to a range of 5.25% to 5.5%, the highest level in 22 years.

Elsewhere in markets, major currencies traded in narrow ranges early Wednesday. The yen was steady after the third gain in four days, while remaining at a relatively weak level.

Key events this week:

Some of the main moves in markets:

Stocks

Currencies

Cryptocurrencies

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Rita Nazareth.

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