Asian stocks took a downturn, and the dollar remained near multi-month highs on Tuesday, as investors reacted to a sharp sell-off in bonds and a surge in gold prices ahead of the U.S. election.
Benchmark 10-year Treasury yields rose by 11 basis points overnight, with an additional 1 basis point increase in early Asian trading, bringing the yield to 4.19%. Meanwhile, gold surged to a record high of just over $2,740 an ounce on Monday, maintaining its strength at $2,725 early Tuesday, signaling investor caution. [US/][GOL/]
Japan’s Nikkei dropped 1.1% in morning trading, reaching its lowest level since early October. The MSCI’s broadest index of Asia-Pacific shares outside Japan also fell 0.8%. [.T]
In the U.S., Wall Street experienced a slight dip, with futures in Asia following the trend lower. The bond market unease may have been driven in part by a rebound in oil prices, which have the potential to stoke inflation. Brent crude futures climbed 1.7% on Monday, remaining steady at $73.89 a barrel in Asia. The ongoing conflict in the Middle East, particularly the death of Hamas leader Yahya Sinwar, has contributed to the volatility in oil prices. [O/R]
Australia’s S&P/ASX 200 index dropped more than 1.3% by mid-morning, with shares in Metcash, an independent grocer, plunging 6% after Goldman Sachs lowered its stock price target, citing risks of losing market share.
Chinese markets were subdued, well below recent highs, as investors await further government action to stimulate the struggling economy. Hong Kong’s Hang Seng and the Shanghai Composite both remained flat.
Foreign exchange markets mirrored the bond movements, pushing the U.S. dollar higher. The euro traded at $1.0819, near its lowest since early August. The Japanese yen stood at a 2.5-month low at 150.67 per dollar, while the Australian and New Zealand dollars hovered close to multi-month lows, trading at $0.6655 and $0.6021, respectively. [AUD/]
Analysts attribute the dollar’s recent strength to market speculation of a potential Donald Trump victory in the upcoming U.S. presidential election. His proposed trade, tax, and immigration policies are expected to trigger higher inflation and interest rates, bolstering the dollar.
With few significant economic data releases scheduled, investors are focusing on U.S. corporate earnings reports for insight into the economic outlook and market sentiment. Companies like General Motors, Texas Instruments, Verizon, Lockheed Martin, and 3M are among those set to release their earnings on Tuesday.
