
(Bloomberg) — Stocks in Asia and US futures declined along with bonds, as traders consider cooling expectations of Federal Reserve rate cuts for the rest of the year.
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The MSCI AC Asia Pacific Index fell as much as 1.1%, as benchmarks in Japan, Australia and South Korea dipped. That’s after equities in the US dropped from nearly overbought levels, following a relentless advance to all-time highs. European contracts bucked the trend and rose.
Treasuries’ 10-year yields ticked up to 4.22% in Asian trading on Tuesday, after Federal Reserve Bank of Kansas City President Jeffrey Schmid said he favors a slower pace of interest-rate reductions given uncertainty about how low the US central bank should ultimately cut rates. Bonds from Australian and New Zealand fell.
The risk of a slower rate-cut pace “would be dollar-positive and also normally a headwind for Asia equities,” said Kieran Calder, head of equity research at Union Bancaire Privee in Singapore.
Several factors, including concerns over supply and better US economic data, are driving the bond selloff, Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note. US election bets are also weighing on the market, with traders “front-running the risk of a ‘Red Sweep,’” he said, referring to the possibility of Republicans taking the White House and Congress.
A presidential win for Donald Trump will stoke concerns that his support for looser fiscal policy and steep tariffs will deepen the federal deficit and fuel inflation, undermining Treasuries.
The chances that Federal Reserve officials will leave interest rates unchanged in November are mounting as the US economy powers ahead, according to Torsten Slok, chief economist at Apollo Global Management.
Asia’s IPO markets are set for their busiest week of listings in more than two years, offering a crucial test of demand as companies rush to raise money before the US election. Hyundai Motor India Ltd. shares dropped about 6% early in their Mumbai debut on Tuesday after the company raised $3.3 billion in the South…
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