The performance of Asian stocks was mixed on Friday, as the wave of bond selling deepened globally and investors awaited the release of the monthly US jobs report later today, amid continued uncertainty about interest rates and developments in the Middle East.
Oil prices have largely stabilized, despite the United States sending an additional aircraft carrier and thousands of soldiers to the Middle East, while US President Donald Trump threatened further potential escalation against Iran, according to the Associated Press.
Japan's Nikkei 225 index fell 0.9 percent to 68,326.72 points, while South Korea's Kospi rose 0.2 percent to 6,984.96 points. The Hang Seng in Hong Kong fell 2.7 percent to 23,956.32 points, recording its lowest levels since July.
On the other hand, the Australian Standard & Poor's ASX 200 index rose 0.4 percent to 8,651.30 points, and the Taiwanese TAEX index increased 0.2 percent. Markets in mainland China were closed for a public holiday.
US stock futures rose slightly, after US Treasury bond yields stabilized in early trading.
In the bond market, the yield of 10-year US Treasury bonds reached about 5.25 percent, after touching 5.34 percent yesterday, Thursday, the highest level since 2002. The yield exceeded the 5 percent level last month, with investors demanding higher returns in light of the inflationary pressures resulting from the global energy shock associated with the war with Iran, in addition to the rise in US government debt.
David Clewell, portfolio manager at T. Rowe Price, said that the 5 percent level for the 10-year US bond yield represents an “important psychological threshold” for investors.
Clewell pointed out that the flexibility of US economic growth makes a rise in the 10-year bond yield to about 5.5 to 6 percent “reasonably likely.” The sharp increase in bond yields has put pressure on stock markets, as higher borrowing costs can reduce returns on stocks.
In Europe, major stock indices fell sharply yesterday, Thursday, as government bond yields jumped. On Wall Street, the Standard & Poor's 500 index rose by 0.2 percent, the Dow Jones rose by less than 0.1 percent, while the Nasdaq Composite increased by less than 0.1 percent.
Investors and traders are awaiting the US jobs report for September, scheduled to be released today, in search of additional indicators regarding the possibility of the Federal Reserve raising interest rates in October, after the central bank raised interest rates in September for the first time in three years.
Oil prices fell slightly in early trading today, with continued uncertainty regarding developments in the Middle East and the possibilities of reducing the escalation between the United States and Iran.
An American official said yesterday, Thursday, that the American army is deploying thousands of soldiers on board a group of ships, including a third aircraft carrier, in the Middle East, after Trump threatened on Wednesday to “destroy” them or reach an agreement, in reference to Iran, during his speech with journalists.
Brent crude, the global benchmark for oil prices, fell 0.2 percent to $102.13 a barrel, after rising in Thursday’s session, a much higher level than about $72 a barrel in late February, before the outbreak of war.
The dollar fell to 157.91 Japanese yen from 158.09 yen, while the euro rose to $1.1250 from $1.1244.
US Energy Secretary Chris Wright said on Thursday that he is “very confident” that Europe will release part of emergency diesel stocks to help mitigate the sharp rise in global fuel prices, at a time when European Union countries are preparing to meet with the European Commission to discuss a coordinated response to rising prices.
Wright added in statements to Fox News: “Europe can also help in the situation, and I am very confident that it will,” calling for a coordinated release of diesel stocks with the entry of the harvest season and the winter heating season. He said that the fuel is available and more of it can be put on the market.
“I think we have some positive news coming,” he added.
For his part, US Treasury Secretary Scott Besent said that Europe must make more diesel available on the market “immediately,” in the latest pressure from Washington on its European allies to contribute to alleviating the scarcity of fuel supplies and rising prices.
These statements come after the administration of US President Donald Trump informed Germany and France of the need to withdraw from their emergency stocks of diesel to help reduce global prices, or face the possibility of imposing US restrictions on diesel exports, according to three people familiar with the discussions.
In Brussels, a European Commission spokesman said that European Union countries will meet with the Commission on Friday to discuss a coordinated response to rising fuel prices.
Earlier Thursday, European Union Trade Commissioner Maroš Šefčović described any potential US ban on diesel exports as “unexpected” for the Europeans, warning of major economic repercussions of such a step.
The American and European move comes at a time when oil product markets are facing an increasing shortage, despite improved crude flows from some regions of the Gulf.
Refining capacities in the region and Russia were damaged, while continued shipping disruptions and a decline in exports from some producers led to a tightening of the diesel market, on which the transportation, agriculture, industry, and heating sectors depend.
The onset of the harvest season in the United States and the winter heating season in Europe also increases the market's sensitivity to diesel availability, which explains Washington's focus on releasing emergency stocks rather than waiting for new supplies to increase.
Oil prices jumped more than 4 percent at settlement on Thursday, after reports that the United States was sending a third aircraft carrier and up to 10,000 additional troops to the Middle East, coinciding with China suspending exports of petroleum products, which reinforced fears of worsening fuel shortages in global markets.
Brent crude for December delivery, the new standard contract, rose $4.28, or 4.37 percent, to $102.31 a barrel, while US West Texas Intermediate crude rose $2.45, or 2.71 percent, to $92.87.
The Wall Street Journal reported that the United States is preparing to send a third aircraft carrier and up to 10,000 additional troops to the Middle East, while US President Donald Trump is considering resuming strikes on Iran after the midterm elections.
Trump told reporters before leaving the White House on an election trip that he was considering his options regarding Iran, adding that Tehran had the choice of concluding a “very fair deal” or facing other consequences.
Pressure on fuel markets increased after Reuters reported that Chinese refineries suspended exports of petroleum products outside Hong Kong and Macau until further notice, according to four sources familiar with the matter.
Giovanni Staunovo, an analyst at UBS, said that China's decision indicates concerns about the availability of petroleum products in the local market, noting that the impact of this step on Chinese crude imports will remain linked to the extent of continued withdrawal from crude and fuel stocks.
