Global Economy

Asia stocks set to trade lower as investors watch treasury yields


Stocks in Asia were set to trade lower on Wednesday following an overnight inversion of a closely watched U.S. Treasury yield curve to its worst level in more than a decade.

Futures pointed to a lower open for Japanese stocks. The Nikkei futures contract in Chicago was at 20,445, while its counterpart in Osaka was at 20,410. The Nikkei 225 last closed at 20,456.08.

Meanwhile, Australian stocks were also set to open lower. The SPI futures contract was at 6,420.0, as compared to the S&P/ASX 200’s last close at 6,471.20.

Asia-Pacific Market Indexes Chart

Investors will watch out for movements in U.S. Treasurys today, after the spread between the 10-year Treasury yield and the 2-year rate fell to negative 5 basis points on Tuesday — its lowest level since 2007. The phenomenon, known as a yield curve inversion, has historically preceded a recession.

Closer to the region, Japan will officially remove South Korea from a list of preferred trading partners on Wednesday, as the two countries remain locked in a diplomatic spat.

Overnight stateside, the Dow Jones Industrial Average dropped 120.93 points to close at 25,777.90 and the S&P 500 slipped 0.32% to finish its trading day at 2,869.16. The Nasdaq Composite declined 0.34% to close at 7,826.95.

Investor sentiment for much of the trading week so far has been cautious following a recent escalation in the ongoing trade war between Beijing and Washington, with the two economic powerhouses announcing more tariffs on each other’s goods late last week.

Hu Xijin, editor-in-chief at Chinese state-run newspaper The Global Times, said in a tweet Tuesday that China is “not putting so much emphasis on trade talks,” adding that it’s “more and more difficult” for Washington to press Beijing to make concessions as the Chinese economy is becoming increasingly driven by domestic growth.

On Tuesday, China announced measures aimed at raising consumption, including a potential removal of restrictions on car purchases.

Currencies

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 97.999, still off highs above 98.4 seen last week.

The Japanese yen traded at 105.73 against the dollar after touching highs around 105.6 yesterday, while the Australian dollar was at $0.6749 after slipping from levels above $0.676 in the previous session.

What’s on tap:

  • Hong Kong earnings: China Construction Bank, Air China

— CNBC’s Fred Imbert contributed to this report.



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