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HONG KONG, Oct.6 (Reuters) – Asian stocks fell on Wednesday, reversing initial gains, as analysts said high oil prices meant stocks reacted quickly to any hint of bad news, such as a rise rates by the New Zealand central bank.
The largest MSCI index of Asia-Pacific stocks outside of Japan fell 0.6%, while Japan’s Nikkei fell 1.66%, after rising more than 1% at the start of the trades.
There were declines in Hong Kong by 0.77%, Korea by 0.98% and Australia by 0.8%, and US equity futures, the S&P 500 e-minis have lost 0.45%.
Oil has stabilized at multi-year highs after being pushed there by concerns over energy supplies and a decision on Monday by the OPEC + producer group to stick with a planned increase in production rather than l ‘increase further.
U.S. crude hit its highest level since 2014, but slashed gains and lost 0.15% to $ 78.81 per barrel. Brent crude fell 0.07% to $ 82.46 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.
These worries have also weighed on stock markets, fearing that rising energy prices will force central banks to raise rates faster to respond to rising inflation.
“Oil has to pull back a bit,” said Dave Wang, portfolio manager at Nuvest Capital in Singapore. “Another peak in oil will force everyone to reassess inflation assumptions.”
New Zealand’s central bank on Wednesday raised interest rates by 25 basis points. Although widely expected, the move still pushed the New Zealand dollar around 0.1% higher, before falling 0.45%, and also appeared to affect the broader stock markets.
The move reinforced concerns that “inflation could trigger more rate hikes from different central banks in the future, as stagflation is one of the biggest worries in the market,” said Edison Pun, analyst at senior market at Saxo Markets.
Chinese markets remained closed for a public holiday and shares in cash-strapped Chinese developer China Evergrande 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.
Overnight, the Dow Jones Industrial Average rose 0.92%, the S&P 500 gained 1.05% and the Nasdaq Composite climbed 1.25%, despite fears the United States might default on their 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 benchmark 10-year T-bill yield reached 1.5466%, approaching a four-month high of 1.5670% reached in late September.
Spot gold fell 0.28% to $ 1,755 an ounce as the non-interest bearing asset was affected by higher yields.
Additional reporting by Tom Westbrook in Singapore; Editing by Stephen Coates
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