Key Points:
Asian stocks turned lower on Tuesday as investors sought safety in bonds and gold amid mounting uncertainty surrounding the U.S. election.
The sell-off in bonds sent Treasury yields soaring, with the 10-year U.S. Treasury yield rising 11 basis points overnight, hitting 4.19% in early Asia trading.
Gold surged to a record high of $2,740 per ounce on Monday, before easing slightly to $2,725.
Japan’s Nikkei dropped 1.1%, reaching its lowest point since early October, while the MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.8%.
Picture: Nikkei 225 tumbles to 38,398.15, with strong bearish momentum as seen on the VT Markets app.
The Nikkei 225 closed at 38,398.15, showing a sharp drop of 1.83% for the session.
The index experienced a considerable decline after opening at 39,115.65, with a session low of 38,193.15.
The chart reflects a strong bearish trend, with prices falling sharply below the short-term moving averages (5, 10, 30-period), indicating strong selling pressure.
This slide came in response to rising bond yields and fears that inflation could escalate following asharp rebound in oil prices.
Brent crude futures jumped 1.7% on Monday amid the ongoing conflict in the Middle East, contributing to the uncertainty.
Australia’s S&P/ASX 200 declined by more than 1.3%, with shares of Metcash dropping 6% after Goldman Sachs downgraded its price target, citing concerns over the company’s potential loss of market share.
The foreign exchange market mirrored the movement in Treasury yields, with the dollar strengthening across the board.
The euro traded at $1.0819, hovering near its lowest point since early August, while the yen traded at 150.67 per dollar, a two-and-a-half-month low.
The Australian and New Zealand dollars also remained pinned at multi-month lows of $0.6655 and $0.6021, respectively.
See also: Aussie and Kiwi Dollars Hit Multi-Month Lows
Analysts suggest the dollar’s rally reflects expectations of a Trump victory in the U.S. presidential election, with his policies likely to lead to higher inflation and stronger yields.
Commonwealth Bank of Australia strategist Joe Capurso noted that if President Trump wins, the downside risk for AUD/USD is moderate, while a victory for Vice President Harris would likely produce a larger market reaction.
With little economic data on the calendar, investors are focusing on U.S. corporate earnings for insights into the health of the economy.
Companies reporting on Tuesday include General Motors, Texas Instruments, Verizon, Lockheed Martin, and 3M.
These reports could help provide further direction for the markets as they navigate the uncertainty surrounding the U.S. election and global economic recovery.
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