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Global market update: Asian markets to retreat, M.East tensions, yields escalate

Published 19/10/2023, 10:31 am
Updated 19/10/2023, 10:31 am
© Reuters. - Asian-Pacific stock markets are bracing for a downturn at the opening bell, as the escalating Israel-Gaza conflict and surging U.S. bond yields trigger investor unease.

By 9:20am AEST (11:20am GMT) S&P/ASX 200, Nikkei 225 Futures, and KOSPI 200 Futures were all trading lower.

In the U.S., stocks experienced a broad-based decline overnight as investors scrutinized corporate earnings results. Adding to the market strain, long-term bond yields reached a fresh 16-year high, putting additional pressure on stocks already impacted by the Middle East conflict. The 10-year U.S. Treasury yield surged to 4.902%, marking its highest closing level since July 2007, which led to a retreat in the S&P 500, Dow Jones Industrial Average, and the NASDAQ Composite by 1.3%, 1%, and 1.6% respectively.

Worries about the potential expansion of the Israel-Hamas war in the Middle East drove oil prices higher. Brent crude rose 1.8% to $91.50 a barrel, its highest level this month. Meanwhile, Morgan Stanley (NYSE:MS) fell 6.8% after the bank reported a drop in quarterly net income, highlighting the ongoing challenges in the banking sector.

Airline stocks suffered a setback after United Airlines Holdings Inc (NASDAQ:UAL) slashed its year-end earnings forecast. United Airlines plummeted by 9.7%, marking its steepest one-day percentage decline since July 2022. Semiconductor stocks also took a hit following U.S. restrictions on artificial intelligence chip exports, making it more difficult for U.S. companies to sell products to the Chinese market.

In contrast, Chinese economic data offered a mixed picture. While economic growth slowed last quarter, retail sales in September surpassed expectations.

In local bond markets, yields on Australian 2 Year government bonds rose to 4.25%, and the 10 Year yield moved higher to 4.65%. Overseas, US Treasury notes surged, with the yield on 2 Year rising to 5.22% and 10-year yield to 4.91%.

The Australian dollar weakened by 0.5%, while the US Dollar Index saw a 0.4% increase.

In Europe, stocks fell as investors grappled with the ongoing Middle East unrest. Major indexes including the Pan-European STOXX 600, FTSE 100, German DAX, and French CAC 40 retreated.

Today's agenda includes Australian employment change, Japanese trade balance, as well as the Korean and Indonesian central bank interest rate decisions.

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