By Tom Westbrook
SINGAPORE (Reuters) – Asian shares edged lower on Tuesday as bond yields and the dollar hit multi-month highs and gold near record highs as investors retreated ahead of the U.S. election.
Ten-year government bond yields rose three basis points in Asia to 4.21%, marking a sharp upward move and reaching the highest level since late July.
US and FTSE stock futures traded 0.2% lower. European futures rose 0.1%. [US/][GOL/]
Investors also took some money off the table in Japan, where a general election is set for Sunday, with stocks, bonds and the yen all falling at the same time as polls show the ruling coalition may lose its majority.
Japan’s Nikkei fell 1.4% in afternoon trading, reaching its lowest level since early October, while the yen reached 151 per dollar for the first time since July and bonds tracked US Treasury sales. [.T][JP/]
“It’s a small capital flight from Japan,” said Naka Matsuzawa, Japan macro strategist at Nomura. More broadly, he said, markets were beginning to speculate on a red sweep that would give Republicans the White House and Congress in November.
“It’s not just Trump’s policies, it’s a higher probability of Trump winning, which means Republicans dominate,” he said. “That drives up term premiums and inflation expectations.”
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.7%, while benchmark indexes in Australia and South Korea lost more than 1%
Chinese markets were well below recent highs as traders awaited more details and especially more urgency and government spending to support the ailing economy.
Hong Kong’s Hang Seng was essentially flat, while the Shanghai Composite was 0.2% higher. Shares of Hyundai Motor India fell 2% in a tepid debut, with retail investors staying away.
WAIT GAME
Except for the yen, currency markets remained stable after a session of almost everything selling against the dollar. The Australian and New Zealand dollars each rose about 0.5% against the US dollar, while the euro and sterling rose 0.1%. [FRX/]
The move pushed the pound back above $1.30, although traders are wary as Bank of England Governor Andrew Bailey is due to speak at 1325 GMT and has recently suggested the central bank could move more aggressively to lower interest rates to decrease.
Commodities remained under pressure due to expectations of subdued Chinese demand and disappointment with the support plans that have emerged so far for the Chinese economy. Iron ore prices in Singapore fell more than 1% to $100.70 per tonne, although copper prices stabilized. [IRONORE/][MET/L]
Oil prices also stabilized, with Brent crude futures trading at $73.96 per barrel in Asia. China’s oil demand is expected to remain weak into 2025, the head of the International Energy Agency said on Monday.
A relatively bare-bones data calendar puts extra emphasis on US earnings for insight into the economy and market sentiment.
General Motors, Texas Instruments Verizon, Lockheed Martin and 3M are among those reporting Tuesday.
“We’ll have to wait until we get some more data,” said ANZ strategist Jack Chambers, with US jobs data due on November 1, ahead of the November 5 election and the next Federal Reserve decision on November 7. points in the diary.
(Reporting by Tom Westbrook in Singapore; Editing by Jamie Freed)
