HONG KONG (Reuters) – Asian stocks fell on Tuesday as investors grappled with inflation fears following sudden cuts to oil production targets for the OPEC+ group, while Treasury yields fell after weak US manufacturing data renewed concern about the economy.
The announcement on Sunday by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, of targeted production cuts sent oil prices higher and inflation expectations held. Brent crude was last up 0.44% at $85.3 a barrel, after jumping more than 6% overnight.
Investors were also assessing economic data released on Monday, which showed that manufacturing activity in the United States fell in March to its lowest level in nearly three years as new orders fell, and analysts said activity could fall further due to tightening credit conditions. . Read more
“There has been a weak trend since May last year, but the recent banking turmoil may have dampened confidence further,” ANZ analysts said in a note.
“Manufacturing is one of the most rate-sensitive sectors of the economy as items such as automobiles are primarily purchased on credit. There is still encouraging news about commodity inflation.”
In early European trades, Euro Stoxx 50 futures across the region were up 0.33%, German DAX futures were up 0.39% and FTSE futures were up 0.35%. US stock futures, S&P 500 e-minis ESc1, fell 0.07%.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 0.4%, reversing early gains.
Japan’s Nikkei (.N225) rose 0.3%. In Sydney, the stock market (.AXJO) rose while the Australian dollar fell after the Reserve Bank of Australia halted its tightening cycle after 10 consecutive interest rate hikes.
China’s leading CSI300 (.CSI300) was little changed by the lunch break, while the Shanghai Composite (.SSEC) was up 0.22%.
Hong Kong’s Hang Seng fell 1.1%, led by technology stocks, as rising Sino-US tensions weighed on investor sentiment.
China warned US House of Representatives Speaker Kevin McCarthy on Tuesday against “repeating the disastrous mistakes of the past” and meeting with Taiwanese President Tsai Ing-wen who is visiting the United States. Read more
On Monday, gains in energy stocks helped lift global stock indices after the sudden new production cuts of the OPEC+ group, which could push oil prices towards $100 a barrel. The S&P 500 Energy Sector Index (.SPNY) rose 4.9%.
However, the prospect of higher oil costs added to Wall Street’s inflation fears, just days after evidence of cooling in prices raised expectations that the US Federal Reserve may soon end its aggressive campaign of monetary tightening.
The Dow Jones Industrial Average (.DJI) rose 0.98%, the S&P 500 (.SPX) rose 0.37% and the Nasdaq Composite (.IXIC) fell 0.27%.
Market watchers have been trying to gauge how long the Fed might need to keep raising interest rates to calm inflation and whether the US economy is heading into recession.
Treasury yields fell after US manufacturing data, raising expectations for some investors that the Federal Reserve will cut interest rates later this year as the economy slows. Separate data also showed US construction spending weakened in February.
The yield on the benchmark 10-year Treasury note was last at 3.4151% compared to its US close of 3.432% on Monday.
The two-year yield rose as traders expected a rise in the federal funds rate, touching 3.9676% compared to the US closing of 3.98%.
The dollar reversed some of its losses but remained on the defensive after losing ground on Monday in the wake of weak US economic data.
Focus on currencies in Asia fell on the Reserve Bank of Australia, which halted its tightening series as financial markets had expected, although economists were divided on the outcome.
The Australian dollar has been volatile and recently fell 0.4% against the greenback at $0.6758.
The US dollar index, which tracks the greenback against a basket of other major trading partners’ currencies, was higher at 102.16.
The single European currency held steady today at $1.0893, after rising 0.5% in a month while the dollar gained 0.2% against the Japanese yen at 132.68.
Gold was a little lower. Spot gold was trading at $1980.59 an ounce.
Edited by Shri Navaratnam
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