Asian shares follow Wall street lower

Sydney — Asian shares fell with Wall Street on Thursday, while a sharp fall in oil prices to a five-month low promised to further reduce inflationary pressures and helped boost the global bond market.

There was also a soft reading on the US labour market overnight. Analysts note the ADP private payrolls report is historically not a very reliable predictor of the official non-farm payroll report due on Friday, making the weekly jobless claims later in the day more important.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.9%, having been down 2.0% so far this month after a 7.3% rally in November. Japan’s Nikkei fell 1.6%, led by declines in energy and tech stocks.

Sentiment about China remained bearish. Chinese trade data showed on Thursday exports unexpectedly rose in November, but imports posted a surprising fall, suggesting domestic demand remains shaky. That followed a cut from ratings agency Moody’s on the Asian giant’s credit outlook a day earlier.

China’s blue chips eased 0.5% to hit a fresh five-year trough, while Hong Kong’s Hang Seng index plunged 1.6% to plough a new 13-month low.

Oil prices rebounded a little after falling nearly 4% overnight to their lowest settlements since June. Worries about global fuel demand drove prices lower, despite pledges from Opec+ producers that they would keep a tight lid on supply.

Brent crude futures edged up 0.6% to $74.72 a barrel while US West Texas Intermediate futures rose 0.6% to $69.8 a barrel.

“That’s probably the oil market giving you a bit of a heads up for what they think demand is going to be like over the next few months,” said Amy Xie Patrick, head of income strategies at Pendal Group.

Combined with the recent price actions in the equity and bond markets, Xie Patrick said the markets were starting to worry whether the global economy could be heading to a hard landing next year.

“Even though bond yields have continued to fall, equity markets are no longer rallying, credit spreads are no longer tightening. The markets are starting to wonder whether this is a good kind of bond yield rally or is the bond market telling you something a little bit more sinister.”

Overnight, Wall Street was dragged lower by energy stocks as oil prices slid. The Dow Jones slipped 0.2%, the S&P 500 lost 0.4%, and the Nasdaq Composite fell 0.6%.

A risk appetite index by State Street Global Advisors showed global investors became less pessimistic in November, but they were not in an unbridled rush into risk, with the index edging up to 0 from -0.55 the previous month.

Asian bonds rallied along with Treasuries. Australian 10-year government bond yield hit a two-and-a-half-month low of 4.225% on Thursday.

The yield on the benchmark US 10-year treasury note was little changed at 4.1208%, after a 11 basis point drop overnight to a three month low of 4.1040%.

The dollar hovered near a two-week high at 104.15 against its major peers heading into the NFP release on Friday. Markets have priced in so much easing that they are clearly vulnerable to an upside payroll surprise.

Economists expect the economy added 180,000 new jobs in November, picking up from 150,000 the previous month.

Softening economic data and recent comments from Federal Reserve officials, including chair Jerome Powell, have heightened expectations that the US rates have peaked and a total of more than 125 basis points in cuts could commerce as early as in March.

Gold prices was 0.2% higher at $2,028.99/oz.

Reuters