Asian stocks fall – Strong US economic data unsettle markets

The Asian stock markets declined on Thursday after U.S. stocks and government bonds came under pressure. Robust economic data from the United States dim prospects for imminent rate cuts by the Federal Reserve. Markets in Australia and Japan opened weaker, and an index of U.S.-listed Chinese companies lost value in New York trading. U.S. futures also fell, weighed down by post-market losses in Microsoft and Meta Platforms following disappointing earnings outlooks. The S&P 500 lost 0.3%, and the Nasdaq 100 dropped 0.8% on Wednesday. While Asian trading markets recorded stable U.S. government bonds, yields rose in Australia and New Zealand. A benchmark for the global bond market fell to its lowest level in nearly three months. Optimistic U.S. economic data for the third quarter, driven by rising consumer spending and defense expenditures, made traders more cautious in assessing easing measures. Underlying inflation rose by 2.2%, aligning with the Federal Reserve's targets. Additionally, the prospect of a possible Donald Trump victory in the upcoming presidential elections raises concerns about inflation developments. Daniel Yoo of Yuanta Securities noted in a Bloomberg television interview that a Trump victory, coupled with higher tariffs and lower corporate taxes, could accelerate inflationary pressure. This could slow down or even question the process of rate cuts. Elsewhere in Asia, the yen was little changed ahead of the Bank of Japan's rate decision, expected to keep the rate unchanged at 0.25%. Trading on the Taiwan stock exchange will be suspended on Thursday due to an approaching strong typhoon. A dollar strength index slightly fell on Wednesday. The one-week implied volatility in the Bloomberg Dollar Spot Index reached its highest level since December 2022, indicating that traders are preparing for more significant fluctuations in the dollar against major currencies like the euro, yen, Chinese yuan, and Mexican peso. This increases the costs of options that hedge against such movements.