Asian shares fall on China’s Party Congress, UK inflation

Sydney — Asian shares were mixed on Wednesday, with investors cautious on China amid the ongoing Party Congress, while European markets are set to extend the optimism on earnings ahead of British inflation readings.

MSCI’s broadest index of Asia-Pacific shares outside Japan reversed earlier gains to be 0.5% lower, driven by a 1.2% drop in Chinese blue chips and a 1.4% fall in Hong Kong’s Hang Seng index.

Elsewhere, Japan’s Nikkei advanced 0.5%, while Australia’s resources-heavy shares gained 0.3%, tracking Wall Street higher.

The pan-region Euro Stoxx 50 futures rose 0.6%.

US S&P 500 futures rose 0.7% and Nasdaq futures jumped 1.0%. Netflix Inc reversed customer losses that had hammered its stock this year and projected more growth ahead, sending its shares 14% higher in after-hours trading.

Better-than-expected quarterly results from Goldman Sachs Group Inc, Johnson & Johnson and Lockheed Martin helped US stocks rally. Both the Dow Jones and the S&P 500 gained 1%.

“While shares have managed to find technical support in recent days and could bounce further ... the near-term downside risks for shares remain high,” said Shane Oliver, chief economist at AMP Capital.

Chris Turner, global head of markets at ING, said a quiet week for US data could also see the dollar correction extend a little.

“But a core view of not just the Fed, but other central banks hiking into a looming recession should mean that the core dollar bull trend remains intact.”

The US dollar firmed 0.2% on Wednesday against a basket of major currencies. It hit another fresh 32-year high of 149.34 yen overnight, before stabilising at 149.28 amid risk of intervention from the Japanese authorities.

Sterling gained 0.12% against the greenback to trade at $1.1333 after easing slightly in the previous session.

Double-digit inflation

The UK, which has been roiled by a historic crisis in the government bond market, will report inflation readings for September later in the day, with annual inflation likely running at a double-digit rate of 10% last month.

That would likely pressure the Bank of England (BOE) to hike more aggressively. The BOE said on Tuesday that it would start selling some of its huge stock of British government bonds from November 1, but would not sell this year any longer-duration gilts.

“Amid rapidly fluctuating views/market price on what the Bank of England will decide to do with rates on 2 November, a key data point of reference will be today’s September UK inflation data,” said Ray Attrill, head of FX strategy, at National Australia Bank (NAB).

A surprising strong inflation report from New Zealand on Tuesday prompted markets to sharply revise up the expected tightening pace for the Reserve Bank of New Zealand (RBNZ).

Oil prices recovered some ground on Wednesday, after plunging more than 3% in the previous session on fears of higher US supply and the economic slowdown in China.

Brent crude futures rose 0.4% to $90.39 a barrel, while US West Texas Intermediate (WTI) crude jumped 0.9% to $83.58 a barrel.

US President Joe Biden will announce a plan on Wednesday to sell off the last portion of his release from the nation’s emergency oil reserve by year’s end, and detail a strategy to refill the stockpile when prices drop, a senior administration official said.

US treasury yields rose slightly on Wednesday after edging lower.

The yield on benchmark 10-year notes edged up three basis points (bps) to 4.0317%, while the yield on two-year notes climbed to 4.4543%, compared with the previous close of 4.4370%.

Gold was slightly lower. Spot gold traded at $1,645.81 per ounce.

Reuters