Asian Stocks Extend Losses, Oil and Gold Soften: Markets Wrap

(Bloomberg) — Asian stocks fell for a fourth day after a selloff in US markets deepened Friday. Gold and crude oil eased back as traders scrutinized the geopolitical situation in the Middle East. The yen briefly breached 150 per dollar.

Most Read from Bloomberg

Oil fell below $88 a barrel while gold softened further away from $2,000 an ounce amid signs Israel’s ground offensive into Gaza has been delayed. US futures contracts advanced in Asian trading after the S&P 500 dropped over 1% Friday, notching its worst week in a month. Treasury yields rose as traders re-focus on the outlook for global interest rates.

Markets are starting to pare back the haven bid in assets after Hamas released two US hostages and aid started to trickle through Egypt’s border with Gaza at the weekend. Still, Israel has stepped up air raids on Gaza in preparation for the “next phase” of its conflict with Hamas, while also warning that Hezbollah risks dragging Lebanon into a wider regional war.

Read: Israel’s Support for Hostage Talks May Delay Invasion of Gaza

In currencies, the yen briefly weakened beyond 150 per dollar earlier Monday, a closely watched level for possible intervention by Japanese authorities to support the currency. Bank of Japan officials are pondering the question of whether to tweak the settings of the yield-curve control program at its policy meeting next week, the Nikkei newspaper reported on Sunday, without saying where it obtained the information.

“Markets are again on high alert for a possible BOJ intervention,” Commonwealth Bank of Australia strategists including Joseph Capurso wrote in a note to clients on Monday. The yen is likely to remain under pressure this week “as the rise in the 10-year Japanese government bond yield, amid growing speculation of BOJ policy tightening, will do little to reduce Japan’s wide bond yield gap with the US.”

Aside from the Middle East crisis, global markets have been whipped around in recent weeks by climbing Treasury yields and growing worries about interest rates staying elevated for longer. Federal Reserve Bank of Cleveland President Loretta Mester said the US central bank is close to wrapping up its tightening campaign if the economy evolves as expected.

In equities, Australian, Japanese and South Korean shares declined and futures contracts in China pointed to drops on Monday morning after US stocks slumped on Friday. The S&P 500 on Friday broke the 200-day moving average — seen by some as a bearish signal — and the VIX, Wall Street’s “fear gauge,” jumped to its highest since March.

While the S&P 500’s declines last week appeared largely orderly, the nearest futures contracts tied to the Cboe Volatility Index — also known as the VIX and a measure of expected swings in America’s benchmark equity gauge — closed Thursday in a pattern known as backwardation. It’s a telltale sign of mounting distress, as traders anticipate more volatility in the near-term than further out in the future.

Read: VIX Is in Backwardation! Here’s Why and What It Means: QuickTake

This week, traders will be parsing for clues on the outlook for global interest rates with inflation readings in Australia and Japan as well as economic activity data in the US and Europe. Federal Reserve Chairman Jerome Powell is due to give remarks and the European Central Bank will deliver a policy decision later in the week.

Key events this week:

Singapore CPI, Monday
Taiwan jobless rate, industrial production, Monday
Eurozone consumer confidence, Monday
EU foreign ministers meet in Luxembourg, Monday
Japanese Prime Minister Fumio Kishida delivers policy speech at Diet session, Monday
Reserve Bank of Australia Governor Michele Bullock speaks in Sydney, Tuesday
Eurozone S&P Global Services PMI, S&P Global Manufacturing PMI, Tuesday
UK S&P Global / CIPS Manufacturing PMI, jobless claims, unemployment, Tuesday
US S&P Global Manufacturing PMI, Tuesday
UN Security Council is expected to open debate on the Middle East, Tuesday
Microsoft, Alphabet earnings, Tuesday
Australia 3Q CPI, Wednesday
Hong Kong Chief Executive John Lee delivers his second policy address, Wednesday
Canada rate decision, Wednesday
Germany IFO business climate, Wednesday
IBM, Meta earnings, Wednesday
South Korea GDP, Thursday
Turkey rate decision, Thursday
European Central Bank rate decision, Thursday
EU leaders summit in Brussels, Thursday-Friday
Chile rate decision, Thursday
US wholesale inventories, GDP, US durable goods, initial jobless claims, Thursday
Intel, Amazon earnings, Thursday
Japan Tokyo CPI, Friday
China industrial profits, Friday
Singapore home prices, Friday
Spain GDP, Friday
US personal spending and income, University of Michigan consumer sentiment, Friday
Exxon Mobil earnings, Friday

Some of the main moves in markets:

Stocks

S&P 500 Index fell 1.3% on Friday; S&P futures rose 0.2% as at 9:34 am in Tokyo
Nasdaq 100 futures rise 0.2%%. The Nasdaq 100 fell 1.5%
Japan’s Topix fell 0.5%
Australia’s S&P/ASX 200 fell 0.9%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0587
The Japanese yen was little changed at 149.83 per dollar
The offshore yuan was little changed at 7.3322 per dollar
The Australian dollar was little changed at $0.6312

Cryptocurrencies

Bitcoin rose 0.3% to $29,941.11
Ether rose 1.4% to $1,663.48

Bonds

Commodities

West Texas Intermediate crude fell 0.7% to $87.50 a barrel
Spot gold fell 0.4% to $1,972.64 an ounce

This story was produced with the assistance of Bloomberg Automation.