HONG KONG, Oct 6 (Reuters) – Asian stocks fell Wednesday, reversing early gains after US and European stocks rebounded overnight as investors shook off worries about a possible US sovereign default during the Oil price paused near new multi-year highs.
Oil gains are being driven by energy supply concerns and come two days after the OPEC + group of producers stuck to their planned production increases instead of increasing them further.
U.S. crude rose to its highest level since 2014 on Wednesday, but it detracted from gains and most recently lost 0.09% to $ 78.87 a barrel. Brent crude fell 0.08% to $ 82.49 a barrel after hitting a three-year high in the previous session.
“The outlook of the OPEC points to a further depletion of the global oil reserves. This is a problem, since the oil reserves are already low,” wrote analysts from CBA in a statement.
Rising prices could threaten global economic recovery as global oil demand growth picks up as economies reopen due to rising vaccination rates, they added.
In the equity markets, MSCI’s broadest index for Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) lost 0.6%, undoing early gains, while the Japanese Nikkei (.N225) lost 0.78%.
Traders say markets are nervous due to worries about the Chinese real estate market and the move towards higher interest rates around the world.
Hong Kong (.HSI) was down 1%, Korea (.KS11) was down 0.9% and Australia was down 0.45%.
US stock futures, the S&P 500 E-Minis, lost 0.44%.
Chinese markets remained closed for a holiday, and shares in Chinese developer China Evergrande (3333.HK) were suspended after trading halted on Monday pending the announcement of a major deal.
Uncertainty over the fate of Evergrande shook Chinese property developer bonds and Hong Kong-listed stocks and bonds on Tuesday after further downgrades in creditworthiness. Continue reading
Elsewhere, New Zealand’s central bank hiked rates by 25 basis points, but the response was muted as it was widely expected that the cash rate should increase to 0.50%.
The announcement caused the New Zealand dollar to rise 0.1% before falling 0.34%.
Overnight, the Dow Jones Industrial Average (.DJI) was up 0.92%, the S&P 500 (.SPX) was up 1.05%, and the Nasdaq Composite (.IXIC) was up 1.25%, despite concerns that the United States could no longer pay its debts.
The Senate will vote on a Democrat-backed move to suspend the U.S. debt ceiling on Wednesday, a key lawmaker said Tuesday, as partisan brinkmanship in Congress risks an economically crippling federal loan default.
However, those fears helped push the dollar back towards its 12-month highs, bringing benchmark government bond yields to near their highest level since mid-June.
In Asian trading, the dollar remained near its annual highs against a basket of its competitors, while the euro EUR = EBS stayed near its 14-month low hit last week.
The safe haven Yen JPY = EBS lost about 0.5%, reflecting positive sentiment in the equity markets.
Benchmark 10-year government bond yields rose to 1.5466% and approached a 4-month high of 1.5670% that was hit in late September.
Spot gold lost 0.15% to $ 1,757.3 an ounce, with the non-interest bearing asset being hurt by higher returns.
Editing by Stephen Coates
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