Asian stocks, particularly Chinese markets, may find some relief after Wall Street's resilience in the face of rising bond yields, though economic data from China remains underwhelming and foreign investors continue to sell Chinese stocks.
Surging U.S. Treasury yields are causing concern among investors as they wonder how much it will impact the rally in stocks and speculative assets, with the S&P 500, technology sector, bitcoin, and high-growth names all experiencing losses; rising rates are making it more difficult for borrowers and increasing the appeal of risk-free Treasury yields.
The US dollar remains strong against major peers and the yen, as Treasury yields rise amid expectations of high US interest rates for a longer period, while China's central bank sets a stronger-than-expected daily midpoint for the yuan to counter mounting pressure on the currency.
The yield on the 10-year Treasury bond is rising to its highest level since 2007, and this is due in part to reduced demand from foreign countries, such as Japan and China, who are diversifying their investments away from U.S. Treasurys.
Stock markets worldwide experience declines amid concerns over the Chinese property market, rising US bond yields, and poor economic data in China and the UK.
The Chinese bond market is experiencing a significant shift due to concerns over China's economic growth prospects, including a bursting property bubble and lack of government stimulus, leading to potential capital flight and pressure on the yuan, which could result in increased selling of US Treasuries by Chinese banks and a rethink of global growth expectations.
Japan is unlikely to intervene in the market unless the yen weakens past 150 to the dollar and becomes a major political issue, according to a former central bank official, who also noted that the benefits of a weak yen are becoming clearer due to the re-opening of Japan's borders.
The recent spike in U.S. bond yields is not driven by inflation expectations but by economic resilience and high bond supply, according to bond fund managers, with factors such as the Bank of Japan allowing yields to rise and an increase in the supply of U.S. government bonds playing a larger role.
China's recent sale of its US Treasurys is a reflection of economic weakness and an attempt to prop up its weakening currency, not a sign of strength, according to Carson Group.
The combined footprint of Japan and China in the US Treasury market is at its lowest on record, leading to speculation that they may sell dollars and liquidate US Treasuries to support their currencies without causing significant market disruption.
Bond market investors will closely watch U.S. jobs data and European inflation numbers, while China's efforts to stabilize its markets and economy continue, and the impact of El Nino poses a threat to global food supplies.
Despite the appearance of a "Goldilocks" economy, with falling inflation and strong economic growth, rising yields on American government bonds are posing a threat to financial stability, particularly in the commercial property market, where owners may face financial distress due to a combination of rising interest rates and remote work practices. This situation could also impact other sectors and lenders exposed to commercial real estate.
Emerging-market central banks are resisting expectations of interest rate cuts, which is lowering the outlook for developing-nation bonds, as central banks in Asia and Latin America turn hawkish in response to the "higher-for-longer" stance taken by the Federal Reserve, currency pressures, and the threat of inflation.
U.S. stock futures decline as bond yields rise despite weak economic news from China and Europe.
JP Morgan predicts that the U.S. dollar is at risk of losing its global reserve status as BRICS countries increase their use of local currencies for trade settlement, although the chances of this happening in the near future are slim.
The Federal Reserve has sold about $1 trillion of its bond holdings without causing strains in financial markets, as part of its balance sheet reduction program.
Asia stocks fall as weak economic data in China and Europe raise concerns over global growth, while the dollar strengthens as investors assess the outlook for U.S. interest rates.
Asian markets are weighed down by concerns over high U.S. bond yields, a strong dollar, China's economic struggles, and rising oil prices.
The yield on the 10-year Treasury note is predicted to decrease significantly for the remainder of this year and in 2024, as economists anticipate the Federal Reserve to loosen its monetary policy and inflation to fall.
The yen strengthened and government bonds slumped as traders reacted to potentially hawkish comments from Bank of Japan Governor Kazuo Ueda on the negative interest rate policy, causing Japanese bank shares to jump and the benchmark bond yield to rise.
The Wall Street Journal reports a notable shift in the stance of Federal Reserve officials regarding interest rates, with some officials now seeing risks as more balanced due to easing inflation and a less overheated labor market, which could impact the timing of future rate hikes. In other news, consumer credit growth slows in July, China and Japan reduce holdings of U.S. Treasury securities to record lows, and Russia's annual inflation rate reached 5.2% in August 2023.
The Bank of Japan's potential shift away from negative interest rate policy has ignited the Japanese Government Bond and currency markets, with the yen seeing its biggest rise in two months and the 10-year JGB yield reaching its highest point in almost a decade.
Chinese property stocks and Japanese government bonds set the tone for global markets as the Hang Seng property index dropped to a fresh September low before rebounding on news that Country Garden won creditor support to delay onshore bond payments, while the Bank of Japan's comments about potential stimulus exit in 2023 pushed the local bond market, and the week ahead is marked by important policy meetings by the Bank of England, the Federal Reserve, and the ECB.
Summary: Asian shares mostly decline as investors await U.S. consumer price data and the Federal Reserve's decision on interest rates.
A retreat of funds from Chinese stocks and bonds is diminishing China's global market influence and accelerating its decoupling from the rest of the world, due to economic concerns, tensions with the West, and a property market crisis.
Asian shares decline amidst concerns about the Chinese property sector, while Japanese investors sell chip stocks; traders prepare for central bank meetings and the Federal Reserve rate decision.
The Bank of Japan is expected to maintain ultra-low interest rates and reassure markets that monetary stimulus will continue amidst China's economic struggles and the global impact of US interest rates.
China has continued to decrease its holdings of US Treasury bills, but there are suggestions that as the rate-hike cycle nears its end, policymakers in Beijing may need to reconsider their decision to unload Treasuries.
The reduced volatility in the US Treasury market has supported risk assets like cryptocurrencies and stocks, with the MOVE index falling to its lowest level since the Fed began raising rates, providing a positive outcome for assets such as bitcoin.
The Japanese yen remains weak against the U.S. dollar due to high U.S. Treasury yields and anticipation of the Bank of Japan maintaining its current monetary policies, while the dollar is boosted by the prospect of higher U.S. interest rates.
The Japanese yen weakened and stocks and bonds remained under pressure as investors prepared for U.S. interest rates to remain high, despite the Bank of Japan sticking to ultra-easy monetary policy and making no changes to its outlook.
