SINGAPORE, Oct 19 (Reuters) – Asian shares fell on Thursday as risk aversion prevailed amid mounting worries about Middle East conflict, while bond selling intensified. Federal Reserve Chairman Jerome Powell.
Investors sought safe-haven assets, keeping gold prices near two-month highs and the dollar firm. MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) fell 1.42%.
A broad sell-off in US Treasuries continued in Asian hours as the yield on the 10-year note touched a fresh 16-year high as investors came to grips with the Federal Reserve’s message that interest rates will remain high for a longer period. Yields rise when bond prices fall.
The gloomy mood will continue as Europe wakes up. Eurostoxx 50 futures were down 0.61%, German DAX futures were down 0.59% and FTSE futures were down 0.35%, as futures indicated that stock markets in the region were set for a lower open.
US President Joe Biden pledged help to Israel and the Palestinians during a lightning visit on Wednesday.
The region has been in turmoil since an explosion at Gaza’s al-Ahli al-Arabi hospital late Tuesday, which Palestinian officials said killed 471 people and blamed what they said was an Israeli airstrike. Israel and the United States said the rocket launch by Islamist militants in Gaza had failed.
“It’s a very confusing, uncertain environment right now,” said Shane Oliver, head of investment strategy and chief economist at AMP in Sydney. “If the conflict is limited to Israel, it will be terrible, but like the war in Ukraine, the markets will learn to live with it.”
“If instead it were expanded to include major oil producers, especially Iran – where the risk is high – that would be a big problem,” Oliver said.
Oil prices fell on Thursday as the United States plans to ease sanctions on Venezuela after OPEC showed no signs of backing Iran’s call for an oil embargo on Israel.
Oil prices rose 2% in the previous session on concerns about disruptions in global supply.
Meanwhile, investor concerns over geopolitical risks cast a shadow over Chinese stocks despite some good news from broad data on Wednesday after the US expanded its chip export ban.
Concerns over China’s property sector have also rattled investors.
Bondholders of Country Garden ( 2007.HK ) are seeking urgent talks with the company and its advisers as the troubled property developer defaults on a $15 million coupon repayment that puts it at risk of default, three sources told Reuters.
China’s blue-chip stock index CSI300 (.CSI300) fell 1.61%, while the Hang Seng Index (.HSI) fell 2%. Japan’s Nikkei (.N225) fell 1.58%.
Waiting for Powell
Federal Reserve Chairman Jerome Powell sat on stage with his counterparts at the US Federal Reserve in New York on Thursday, focusing on an apparent agreement to keep interest rates unchanged at their next meeting in two weeks.
A Reuters poll of economists indicated the Federal Reserve will keep its key interest rate on hold until Nov. 1 and may wait longer than previously thought before cutting it.
While a small majority still see a cut before mid-2024, a sizeable minority, around 45%, now see no rate cut in the second half of next year or later, up from 29% in the last poll.
“I think he (Powell) will defend his challenges in this environment,” said AMP’s Oliver.
The yield on 10-year Treasury notes rose 6.4 basis points to 4.966%, the highest since mid-2007.
The dollar index, which measures the U.S. currency against six rivals, rose 0.056%%. The Japanese yen was at 149.80 to the dollar.
US crude was down 0.16% at $88.18 a barrel, while Brent was down 0.43% at $91.11.
Spot gold was at $1,948.42 an ounce, the highest since August 1 at $1,962.39 earlier this week. Gold prices have risen 6 percent in the last two weeks.
Report by Ankur Banerjee; Editing by Christopher Cushing and Lincoln Feast.
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