Oil prices scaled one-year highs on Thursday while world stocks eyed their longest losing streak in two years as worries deepened about persistently high interest rates, sending investors to shelter in the safety of a surging US dollar.
A surprisingly big drop in US crude stocks has stoked concern that fuel demand is outstripping production right when markets least needed another supply-side shock.
US crude rose 3.6 per cent on Wednesday and another 1 per cent on Thursday to hit $95 a barrel for the first time since August 2022. Brent futures hit a one-year high at $97.69.
The prospect of higher energy costs and the spectre of sticky inflation put more pressure on longer-dated bonds. Benchmark 10-year Treasury yields were steady in Asia, but at 4.599 per cent are up more than 50 basis points this month.
“It doesn’t help,” said ING economist Rob Carnell. “What’s really starting to weigh on stocks is this upwards push in Treasury yields, and it’s a pretty sensible response,” he said, with equities at risk of further losses even if bonds rebound.
Traders are also watching lawmakers’ efforts to avoid a US government shutdown.
MSCI’s index of global equities (.MIWD00000PUS) moved a fraction lower and could notch its 10th straight daily fall on Thursday, which would equal a long losing streak from 2021.
MSCI’s index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was pinned near a 10-month trough. US and European futures fluctuated either side of flat.
Japan’s Nikkei (.N225) fell 1.8 per cent, with investors selling stocks that went ex-dividend.
The strong dollar has the Japanese yen within a whisker of 150-per-dollar, seen as a level likely to provoke an official response or intervention.
Dollar/yen hit 149.71 on Wednesday and traded at 149.40 on Thursday in Asia. The euro dropped 0.7 per cent to a nine-month low of $1.0488 on Wednesday and last bought $1.0503.
German and Spanish inflation data are due later in the day, as are a number of central banker appearances, most notably Federal Reserve Chair Jerome Powell at 2000 GMT.
Chinese markets limped toward a long holiday that begins on Friday and the break may be a welcome one for traders since recent weeks have brought a drumbeat of bad news and selling.
On Thursday shares in cash-strapped developer China Evergrande (3333.HK) were suspended in Hong Kong after a report that chairman Hui Ka Yan was under police watch. The stock, once worth more than HK$30, had closed at HK$0.32 on Wednesday.
Investors worry a liquidation would further damage the tanking property market and stifle signs of recovery in parts of the Chinese economy.
“China’s property-sector stress will continue to pose cross-sector credit risks in the near term,” said Fitch Ratings on Thursday. “The government’s modest policy easing to date is unlikely to drive a sharp turnaround in homebuyers’ sentiment.”
The Hang Seng (.HSI) fell 1 per cent and is close to a 10-month low. The mainland CSI300 (.CSI300) fell 0.2 per cent.
China’s yuan is also coming under pressure and only a very strong fixing of its trading band has held off sellers. The yuan last changed hands at 7.3057 per dollar, not far from the weaker extremity of its trading band.
Higher energy prices helped the Australian dollar to stabilise at $0.6378.
Gold is heading for its worst week since February as the rise in Treasury yields drives investors out of the precious metal, which pays no yield, and it nursed losses at $1,875 an ounce.