HomeBusinessAsian stocks fall as bonds extend sell-off: Markets rally

Asian stocks fall as bonds extend sell-off: Markets rally

(Bloomberg) — Asian shares fell for a second day as Wall Street stocks took a breather from their longest weekly rally this year. Bonds tumbled as expectations of Federal Reserve rate cuts cooled.

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Stocks in Australia, Japan and South Korea all fell, while futures for benchmarks in Hong Kong pointed to losses. That’s after US stocks fell from near-overbought levels following a brutal run to record highs.

US 10-year yields rose 11 basis points to 4.20% as traders priced in a slower pace of monetary policy easing. Jeffrey Schmid, president of the Federal Reserve Bank of Kansas City, said he favors a slower pace of rate cuts given uncertainty about how low the U.S. central bank should ultimately cut rates. Australian and New Zealand bonds fell in early trade.

A host of factors are driving the bond sell-off, including supply concerns and better U.S. economic data, Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note. US election betting is also weighing on the market, with traders “at risk of a ‘Red Sweep,’” he said, referring to the possibility of Republicans taking over the White House and Congress.

“The trend up is growing legs,” he said.

In Asia, the focus remains on Beijing’s efforts to boost growth in the struggling economy through stimulus measures. In the latest move, Chinese banks cut their key interest rates after an easing by the central bank in late September, as part of a series of measures aimed at halting the housing market slump.

Japanese traders are keeping a close eye on the run-up to next weekend’s elections. Support for Prime Minister Shigeru Ishiba’s governing coalition continues to decline, suggesting the vote could lead to a weakened and unstable government.

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Wall Street faces a major earnings hurdle this week, with about 20% of S&P 500 companies expected to report, as traders brace for key results from Tesla Inc. to Boeing Co. and United Parcel Service Inc.

The latest Bloomberg Markets Live Pulse survey shows that respondents consider corporate America’s performance more important to stock market performance than who wins the November election or even the Federal Reserve’s policy path.

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