Asian shares extend global sell-off, dollar holds gains

Former manager of Japanese national baseball team Hideki Kuriyama rings a bell during a ceremony marking the end of trading in 2023 at the Tokyo Stock Exchange (TSE) in Tokyo, Japan Dec 29, 2023. REUTERS/Kim Kyung-Hoon

SYDNEY  – Asian shares extended a global sell-off on Wednesday while the dollar held gains as market optimism about early and aggressive U.S. interest rate cuts ebbed ahead of the release of Fed minutes and jobs data.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.1 percent after a 1-percent drop the previous day in a sluggish start of the new year. Japan markets remain shut for a holiday.

South Korean shares slid 1.8 percent, Australia’s resources heavy stocks declined 1.1percent, while Hong Kong’s Hang Seng index fell 1percent, driven by a 1.5-percent plunge in technology shares.

“Risk assets struggled a tad yesterday, and that makes a degree of sense given the complicated back story, and the remarkable rally seen into year end,” said Padhraic Garvey, regional head of research, Americas, at ING.

“While a one-day move cannot be simply extrapolated, there are reasons to be a tad concerned on the risk front at this early phase of 2024. Geo-political concerns have not abated, and in fact if anything are elevating.”

Indeed, tensions in the Middle East are ratcheting up. Israel on Tuesday killed Hamas deputy leader Saleh al-Arouri in Lebanon’s capital Beirut, raising the potential risk of war in Gaza spreading well beyond the Palestinian enclave.

Denmark’s Maersk and German rival Hapag-Lloyd said on Tuesday their container ships would continue to avoid the Red Sea route.

Overnight, Wall Street’s euphoria about rate cuts prospects cooled a little as stocks retreated from record highs. The Nasdaq slid 1.6percent and the S&P 500 lost 0.6percent.

READ: S&P, Nasdaq begin 2024 with lower close as Apple, big tech weigh

Apple fell nearly 3percent to a seven-week low after Barclays downgraded its shares on demand concerns. Tesla shares ended flat after delivering a record number of electric vehicles in the fourth quarter, but the company lost its spot as the top EV maker to China’s BYD.

Stocks were also pressured by a climb in Treasury yields in the new year. The 10-year U.S. Treasury yield briefly popped above 4percent overnight, the first time in two weeks, but closed at 3.9406percent, up 8 basis points for the day.

Cash Treasuries were not traded in Asia due to the holiday in Japan. 10-year Treasury futures were mostly flat on Wednesday.

In the foreign exchange market, currencies mostly traded sideways in early Asia hours. The U.S. dollar, which climbed 0.8 percent against its peers overnight to a two-week high, hovered at 102.15.

READ: Apple hits seven-week low after Barclays downgrade

The euro was last at $1.0940, having fallen 0.9percent overnight, while the Japanese yen nursed losses at 142.12 per dollar after a 0.8percent decline.

Bitcoin rose 0.5 percent to $45,205, not far from a 21-month top of $45,922 hit on Tuesday.

READ: Bitcoin climbs above $45,000 for first time since April 2022

Oil prices were marginally higher after closing lower on Tuesday. U.S. crude futures drifted 0.1percent higher to $70.43 a barrel, after dropping more than 1percent on Tuesday, while Brent LCOc1 was flat at $75.86 a barrel.

Market focus is now on the Fed minutes for the December policy meeting due later in the day and a slew of data this week which could help justify its optimism of the aggressive policy easing that has been priced in. Futures have wagered on six rate cuts in 2024.

The ISM survey on U.S. manufacturing is also due later on Wednesday, as well as job openings data, before a private payrolls report and jobless claims results on Thursday. The closely watched U.S. nonfarm payrolls report is due on Friday.

Spot gold was 0.1 percent higher at $2,060.18 an ounce.