Oil at new multi-year highs, Asian stocks fall

HONG KONG, Oct.6 (Reuters) – Asian stocks fell on Wednesday, reversing their initial gains, after an overnight rebound in US and European stocks as investors ignored concerns about a possible US government default, while that oil has stopped near new multi-year highs.

The oil gains are driven by concerns over energy supply and come two days after the OPEC + producer group stuck to its planned production increase rather than increasing it further.

U.S. crude hit its highest level since 2014 on Wednesday, but slashed gains and 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.

“OPEC’s outlook suggests further reductions in global oil stocks. This is a problem given that oil stocks are already low,” CBA analysts wrote in a note.

Rising prices could threaten the global economic recovery as growth in global demand for oil accelerates as economies reopen thanks to rising vaccination rates, they added.

In stock markets, the MSCI’s largest Asia-Pacific stock index outside of Japan (.MIAPJ0000PUS) fell 0.6%, wiping out initial gains, while Japan’s Nikkei (.N225) lost 0.78%.

Traders say the markets are nervous due to concerns over the Chinese real estate market and the approach of higher interest rates around the world.

There were declines in Hong Kong (.HSI) of 1%, Korea (.KS11) down 0.9%, and Australia of 0.45%.

US equity futures, S&P 500 e-minis lost 0.44%.

Chinese markets remained closed for a public holiday, and shares of cash-strapped Chinese developer China Evergrande (3333.HK) were suspended after going out of business on Monday pending the announcement of a major transaction.

Uncertainty over Evergrande’s fate shook the bonds of Chinese real estate developers and Hong Kong-listed stocks and bonds on Tuesday following further downgrades. Read more

Elsewhere, New Zealand’s central bank raised interest rates by 25 basis points, but the reaction was mixed as the decision to raise the policy rate to 0.50% was widely expected.

The announcement sent the New Zealand dollar up about 0.1%, before falling 0.34%.

Overnight, the Dow Jones Industrial Average (.DJI) rose 0.92%, the S&P 500 (.SPX) gained 1.05%, and the Nasdaq Composite (.IXIC) climbed 1.25% , despite fears that the United States might default on its debt.

The Senate will vote on Wednesday on a Democrat-backed measure to suspend the U.S. debt ceiling, a key lawmaker said Tuesday, as partisan congressional spirit risks an economically crippling federal credit default.

These fears, however, helped push the dollar back to its 12-month highs and benchmark T-bill yields near their highest level since mid-June.

In Asian trade, the dollar hovered near its year highs against a basket of its peers, while the euro EUR = EBS remained close to its 14-month low reached last week.

The safe haven JPY = EBS fell around 0.5%, reflecting a positive mood in equity markets.

The benchmark 10-year T-bill yield reached 1.5466%, approaching a four-month high of 1.5670% reached in late September.

Spot gold fell 0.15% to $ 1,757.3 an ounce as the non-interest bearing asset was affected by higher yields.

Editing by Stephen Coates

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