Asian Shares on Edge with Oil Volatile and US Bond Yield Rising

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On Wednesday, Asian share markets remained jittery in early trading because of a surge in US Treasury yields, along with volatile prices of oil due to some of the price-cooling moves that were implemented by the United States and some other countries. There was a 0.24% decline in the MSCI’s broadest Asia-Pacific share index outside of Japan, whereas a 1.13% fall was seen in the benchmark Japanese Nikkei stock price index. The stock index came back from holiday and caught up with the falls that had occurred globally. Oil had risen to a one-week high, but steadied after its 3% climb. 

The United States announced that it would coordinate with India, Japan, China, South Korea and Britain for releasing millions of barrels of oil that are stored in their strategic reserves. This was done for cooling down the prices after OPEC+ producers were not swayed by the repeated demands for cruder. Early losses in Brent crude futures were reversed, as they rose by 0.15% to reach a price of $82.43 per barrel and there was a 0.33% increase in US crude futures to a price of $78.76 per barrel. Market experts said that a lot of things were happening in the market. 

They US dollar remains strong and US yields are on the rise, which has disrupted the Asian markets because there will be depreciation in a lot of currencies, other than the Chinese yuan, and the widening differentials in real rate will lead to outflows. However, it appears that Chinese asset classes are doing well because the People’s Bank of China eliminated a number of hawkish references from the quarterly monetary policy support on Friday. Chinese blue chips had remained flat at 0.1% previously, but this week saw them climb by 0.5%, as opposed to a 1% decline in the Asian regional benchmark. 

Investors will be keeping their eye on the minutes of the November meeting of the policy committee of the US Federal Reserve, which could indicate when they plan on accelerating the tapering. The rise in Treasury yields had resulted in a negative reaction from non-interest-bearing gold, but it made a bit of recovery. The spot price climbed by 0.2% to $1,794, but remained close to the two-week low on Tuesday. As far as major currencies are concerned, they are trading based on the expectations of the market about the normalization schedules of the interest rates of central banks. 

On Wednesday, interest rates were increased once more by the central bank in New Zealand because of inflationary pressure and as economic activity surged due to easing of coronavirus restrictions. However, as markets are open to the possibility of a bigger hike, the New Zealand dollar struggled and ended a tad weaker at $0.6928. The Bank of Korea (BOK) is next on the agenda and its policy meeting is scheduled for Thursday. Currency markets were holding their breath on Wednesday, as the US dollar mostly held onto its recent gains due to the increase in Treasury yields.