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Asian Stock Market Poised for Decline Following Slump in Treasuries: Market Overview

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Asian Stock Market Expected to Decline Following Slump in Treasuries

Asian shares are anticipated to experience a decline as a result of hawkish signals from the Federal Reserve, which intensified the rout in Treasuries and led to a volatile session for the S&P 500. Japanese and Australian futures indicate substantial declines at the opening on Tuesday. The Federal Reserve's messaging regarding the need to keep borrowing costs high to control inflation overshadowed the relief in the stock market after a deal was reached to avoid a US government shutdown. Yields on Treasuries rose significantly, with the benchmark 10-year note reaching its highest level since 2007. Energy and financial stocks sold off, erasing gains for the year in the S&P/Toronto Stock Exchange Composite Index. The tech-heavy Nasdaq 100, however, managed to end the day higher due to the performance of firms like Microsoft Corp., Apple Inc., and Nvidia Corp.

Central Bank Actions and Market Sentiment

The statements from key figures at the Federal Reserve, including Fed Vice Chair for Supervision Michael Barr and FOMC hawk Michelle Bowman, regarding the duration of elevated interest rates have contributed to market uncertainty. The Reserve Bank of Australia is expected to maintain its policy rate unchanged, while the central bank of New Zealand is also anticipated to keep rates unchanged ahead of a general election. China is currently observing a week-long holiday.

Market Reactions and Investor Outlook

The S&P 500's intraday drop, despite the resolution of the government shutdown risk, has been seen as a bearish signal. The market's response to higher interest rates reflects the reality of a prolonged period of elevated rates. The selloff in global bonds gained momentum as traders raised bets on a November rate hike by the Federal Reserve. The dollar strengthened against its peers, and gold prices slipped to seven-month lows due to surging bond yields. Oil prices retreated, with concerns about waning demand from China potentially limiting the impact of OPEC+ supply cuts.
Key Events and Market Indicators
This week, market participants will be closely monitoring events such as China's week-long holiday, speeches by Federal Reserve officials, the US ISM manufacturing index, Australia's rate decision, and the release of economic data including the US nonfarm payrolls report. The performance of major stock indices, currencies, cryptocurrencies, bond yields, and commodities will continue to be key indicators of market sentiment and investor outlook.

Implications of Asian Stock Market Decline for New Businesses

The anticipated decline in Asian shares, triggered by hawkish signals from the Federal Reserve and a slump in Treasuries, could have significant implications for new businesses. The volatile economic climate, marked by high borrowing costs and inflation control measures, could pose challenges for startups, particularly those reliant on investment from these markets.

Impact of Central Bank Actions

Statements from key figures at the Federal Reserve have contributed to market uncertainty. New businesses, especially those in the financial sector, may need to navigate this uncertainty and adapt their strategies accordingly. The decisions of central banks, such as the Reserve Bank of Australia and the central bank of New Zealand, to maintain unchanged policy rates could also influence the financial planning and projections of these businesses.

Market Reactions and Business Strategy

The bearish signal from the S&P 500's intraday drop and the market's response to higher interest rates reflect a reality of prolonged elevated rates. New businesses, particularly those in sectors like real estate and retail, which are sensitive to interest rate changes, may need to factor this into their business models and growth strategies.
Monitoring Key Events and Market Indicators
New businesses must keep a close eye on key events and market indicators, such as speeches by Federal Reserve officials, the US ISM manufacturing index, and Australia's rate decision. These indicators can provide valuable insights into market sentiment and investor outlook, helping businesses make informed decisions and adjust their strategies as needed.
Story First Published at: https://financialpost.com/pmn/business-pmn/asia-stocks-set-to-drop-after-slump-in-treasuries-markets-wrap
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