Asian Stocks Set to Fall, Treasury Yields Slide: Markets Wrap

(Bloomberg) — Asian stocks were set for a modest decline as oil surged on the prospect of renewed US-Iran conflict, reviving inflation concerns. Bonds will be in focus after Treasuries rebounded.

Equity-index futures for Japan and South Korea pointed to losses, while contracts for Australia edged higher. The cautious start was set to come after Wall Street gauges eked out modest gains in a volatile session.

The technology sector will be in focus after a US semiconductor gauge rose 1.6% and people familiar with the matter said Anthropic PBC was seeking to go public as soon as mid-November. Contracts for the tech-heavy Nasdaq 100 Index advanced 0.3%.

Treasuries rebounded in New York from a bruising global bond selloff despite higher oil prices, as pressure in European markets spurred demand for haven assets. The 10-year yield retreated from a 24-year high to close at 5.24%, with dovish commentary from Federal Reserve officials also supporting the rally. Australian and New Zealand bonds rose early Friday.

The prospect of renewed US-Iran hostilities lifted oil, with US crude rising in early Asian trading after Brent jumped more than 4% to reclaim $100 a barrel. Elsewhere, a gauge of dollar strength reached its highest since late June on Thursday, while gold advanced 0.5% to about $4,175 an ounce.

The prospect of another flare-up in the Middle East leaves investors balancing the inflationary threat from higher oil against signs the Fed may take a more measured approach to further tightening. The path for energy prices and any escalation between Washington and Tehran may determine whether the rebound in Treasuries can hold and how much pressure spills into equities.

“We continue to think the Fed remains oriented towards a limited two or three hike mini-cycle in the base case,” said Krishna Guha at Evercore. “It does not currently see demand so strong as to create obvious danger of demand-driven overheating risk.”

The bounceback in the US bond market gathered pace on Thursday as concern around France’s fiscal and political situation pushed euro-area risk premiums higher. Long-term UK bond yields also shot past 6%.

In the US, haven appetite helped push the yield on two-year Treasuries lower by 10 basis points to 4.79%.

Also underpinning gains were remarks from Fed Vice Chair Philip Jefferson, who said policymakers should take more time before deciding whether additional interest-rate increases are needed to slow inflation.

He echoed comments from New York Fed President John Williams, who on Tuesday said there was no urgency in considering another hike after the Federal Open Market Committee’s decision to lift rates in September.

Meanwhile, traders are also paying close attention to the geopolitical developments in the Middle East and the flow of oil and gas through the Strait of Hormuz. The Pentagon may soon deploy another aircraft carrier and 10,000 sailors and marines to the Persian Gulf, giving US commanders more options should President Donald Trump decide to escalate attacks on Iran.

Wall Street analysts and traders said this week that crude flows from the Middle East are closing in on pre-war levels. Iran, however, appeared to have loaded no crude oil onto tankers in September, the latest indication of a US naval blockade’s effectiveness in severing the Islamic Republic’s access to energy markets.

“The increase in flows remains highly vulnerable to escalation,” said Hamad Hussain, a climate and commodities economist at Capital Economics. “I’d also describe the market as being structurally tight given the relatively low level of inventories after six months or so of drawdowns. That puts a floor under prices.”

Corporate Highlights:

Nike Inc. said it’s consolidating its operations and cutting jobs while warning that its sales slump is poised to deepen. Accenture Plc, the technology consulting firm that’s under pressure to show it can help clients adopt AI and can undergo such a transition itself, reported that it booked more business in the fourth quarter than analysts had expected. Taiwan Semiconductor Manufacturing Co. is weighing a new campus in Texas that would add tens of billions of dollars in new investment to the company’s multiyear expansion into chipmaking in the US. Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.1% as of 8:13 a.m. Tokyo time Hang Seng futures were unchanged S&P/ASX 200 futures rose 0.5% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was unchanged at $1.1244 The Japanese yen was little changed at 158.00 per dollar The offshore yuan was little changed at 6.7147 per dollar The Australian dollar was little changed at $0.6929 Cryptocurrencies

Bitcoin was little changed at $84,644.64 Ether was little changed at $2,698.76 Bonds

Australia’s 10-year yield declined four basis points to 5.36% Commodities

West Texas Intermediate crude rose 0.1% to $92.99 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation.

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