Stock markets in Asia witnessed a fall on Thursday during the opening session as Wall Street started to lose over a long rally. The treasury yields were also near five-months low on hopes that UK’s inflation readings would be sounded in US price data.
The long rally in equity markets, driven by falling interest rates and a softer mood shown by the Federal Reserve, started losing its winning streak even after the US economic data beat the initial expectations, turning markets green for a while. However, a far steeper decline in Britain’s inflation numbers sparked confusion in the market.
Market analyst at CMC Markets said that, “all three US benchmark averages retreated sharply late in the session after hitting their respective highs, ending a more-than-one-week rally. This could have been due to an overbought market as rate cuts optimism ran out of steam.”
The global government bond yields acted as a “fuel on the fire”, and accelerated the downfall of stock markets due to risk-off sentiment.
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Effects on other Markets
European markets also followed a similar path, opening in the red zone with Euro Stoxx 50 futures falling by 0.48%, FTSE fell by 0.57%, while German DAX dipped by 0.44%.
Asia markets were on a similar track, following the fall in Wall Street, MSCI index lost 0.3% of the value after US markets closed in red in the previous session. Although, the index had seen an increase of 1.7% during the past month.
Talking about other smaller markets, US stock futures (S&P 500 e-minis) were up by 0.33%, Nikkei (.N225) fell witnessed the deepest fall losing around 1.55% of its value, and Australian stock market (.AXJO) slipped by 0.45%.
The blue-chip index of China CSI300 index (.CSI300) was in a different zone, rising by 1.25% as it rebounded from a 5-year low hit in the previous closing. Foreign Institutional Investors (FIIs) were the net buyers in the Chinese markets.
However, Hong Kong markets followed the global trend keeping low in the early trading session, but soon reversed and gained slightly in the afternoon.
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What Did the Fall Looked Like?
Wall Street’s impressive rally that had continued over the past week, ended abruptly on Wednesday in mid-afternoon.
All three major US stock indexes that were at their weekly highs diverged late in the afternoon to end 1.3 – 1.5 percent lower than previous session. S&P 500 (.SPX) lost 1.47% of its value, similarly Dow Jones Industrial Average (.DJI) slid by 1.27%, meanwhile Nasdaq composite (.IXIC) fell by 1.5%.
The yield on US treasury notes reached 3.86% compared with its previous close of 3.87%, falling to almost 5-months low as government bonds yield fell all around the globe after the release of UK’s inflation numbers.
However, the 2-year yield rose according to the traders expectations, reaching 4.37% compared with a close of 3.6% in the previous session.
In commodities markets, Brent moved around $80 a barrel amid tensions over global trade and supply chain disruptions in the red sea following attacks on ships, and news of US-led navy force against Yemen.
Previously, Brent crude was trading at $79.62 per barrel, while US crude dipped by 0.11% to $74.14 per barrel.