(Bloomberg) — European shares are set to fall, tracking weakness in Asian stocks as a global rally in Chinese stocks has been paused. Oil gained on concerns about escalating tensions in the Middle East.
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Futures on the Euro Stoxx 50 index fell 0.4%, while those on US stocks fell 0.2%. A gauge of Chinese stocks in Hong Kong fell 1.6%, snapping a 13-day winning streak. Japanese shares rose on a weak yen. Markets in mainland China remain closed for Golden Week.
The pound weakened after the Guardian reported that Andrew Bailey, the governor of the Bank of England, promised a ‘slightly more aggressive’ interest rate cut.
There is some “profit taking as stimulus momentum has stalled with China on holiday,” said Charu Chanana, global market strategist at Saxo Markets. “Markets still remain uncertain about the impact of the announcements to address China’s structural headwinds.”
European traders will head to their desks against the backdrop of mounting headwinds for businesses in the region, with French President Emmanuel Macron approving a temporary tax on the country’s biggest companies. US prosecutors have closed the investigation into possible price fixing by German software maker SAP SE and tech reseller Carahsoft Technology Corp. extensive.
Japan’s Topix index rose more than 1% after new Prime Minister Shigeru Ishiba said on Wednesday that the economy is not ready for another interest rate hike, pushing the yen lower. The Japanese currency fell 0.2% to 146.78 per dollar on Thursday, after falling 2% the day before.
The dollar’s renewed strength added to pressure on the yen after stronger-than-expected employment data from the ADP on Wednesday prompted traders to cut their bets on aggressive interest rate cuts by the Federal Reserve. Swap traders expected about 33 basis points of policy easing at the central bank meeting in November, down from 44 basis points last week.
Global stocks are on track for their first weekly loss in four weeks amid continued threats of an escalation of geopolitical tensions in the Middle East and speculation over the pace of the Fed’s monetary policy easing. Investors will focus on Friday’s nonfarm payrolls data to further gauge the size of the Fed’s next rate cut.
“After the initial unrest due to geopolitical risks in the Middle East, Asian markets managed to regain some calm during today’s session,” said Jun Rong Yeap, market strategist at IG Asia Pte. “The question has been how aggressive Israel’s response will be and whether energy infrastructure will be affected, but it is expected that further clarity could take some time,” he said.
Oil rose as investors waited for Israel’s response to Iran’s missile attack, with US President Joe Biden urging Israel to refrain from attacking Iran’s nuclear facilities.
Bloomberg’s dollar index gained for a fourth day, buoyed by rising government bond yields. U.S. 10-year yields rose one basis point to 3.79% in Asian trading, after rising five basis points in New York amid a flare-up of tensions in the Middle East.
Main events this week:
Some of the major moves in the markets:
Stocks
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S&P 500 futures fell 0.2% as of 2:56 p.m. Tokyo time
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Nikkei 225 futures (OSE) rose 2.2%
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Japan’s Topix rose 1.1%
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Australia’s S&P/ASX 200 was little changed
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Hong Kong’s Hang Seng fell 1.9%
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Euro Stoxx 50 futures fell 0.4%
Currencies
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro fell 0.2% to $1.1028
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The Japanese yen was little changed at 146.58 per dollar
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The offshore yuan fell 0.1% to 7.0458 per dollar
Cryptocurrencies
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Bitcoin rose 0.4% to $61,161.35
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Ether was little changed at $2,383.44
Bonds
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The yield on 10-year government bonds was little changed at 3.79%
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Japan’s 10-year yield was little changed at 0.815%
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Australian ten-year yields rose six basis points to 4.02%
Raw materials
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West Texas Intermediate crude rose 1.3% to $71.03 a barrel
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Gold fell 0.2% to $2,653.84 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from Winnie Hsu and John Cheng.
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