(Bloomberg) — Asian equities declined for a second day as Wall Street stocks took a breather after notching their longest weekly rally this year. Bonds tumbled on cooling expectations of Federal Reserve rate cuts.
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Shares in Australia, Japan, and South Korea all fell, while futures for benchmarks in Hong Kong pointed to losses. That’s after equities in the US dropped from nearly overbought levels, following a relentless advance to all-time highs.
US 10-year yields jumped 11 basis points to 4.20% as traders price in a slower pace of monetary policy easing. Federal Reserve Bank of Kansas City President Jeffrey Schmid said he favors a slower pace of interest-rate reductions given uncertainty about how low the US central bank should ultimately cut rates. Australian and New Zealand bonds fell in early trading.
A multitude of factors are driving the bond selloff, including concerns over supply and better US economic data, Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note. US election bets are also weighing on the market, with traders “front-running the risk of a ‘Red Sweep,’” he said, referring to the possibility of Republicans taking the White House and Congress.
“The trend higher is growing legs,” he said.
In Asia, focus remains on Beijing’s efforts to boost growth in its struggling economy via stimulus. In the latest move, Chinese banks cut their benchmark lending rates after easing by the central bank at the end of September, part of a series of measures aimed at halting a housing market slump.
Japanese traders are keeping one eye on the runup to this coming weekend’s election. Support for Prime Minister Shigeru Ishiba’s ruling coalition is continuing to soften, indicating the possibility that the vote may result in a weakened and unstable administration.
Wall Street faces a big earnings hurdle this week, with roughly 20% of the S&P 500 companies scheduled to report, with traders gearing up for key results from Tesla Inc. to Boeing Co. and United Parcel Service Inc.
The latest Bloomberg Markets Live Pulse survey shows respondents see Corporate America’s results as more crucial for the equity market’s performance than who wins the November election or even the Federal Reserve’s policy path.
