US futures inch higher, suggesting Wall Street could recoup some losses
Investors are also watching the rise in commodity prices, as oil hit a several-year high, and proceedings in Congress, where a deadline for US lawmakers to raise the debt limit is approaching.
In Hong Kong on Tuesday afternoon trade, the yield on the benchmark 10-year Treasury note rose to 1.493%, up from Monday’s 1.481%, according to Tradeweb. Yields, which move in contrast to prices, have climbed up from a recent trough of 1.173% in early August.
“Equity markets today are more concerned about inflation, the likelihood that we are going to see higher rates then, and the fact that they are trading at very high levels,” said Rob Carnell, head of ING. Research and Chief Economist for the Asia-Pacific region.
In Tokyo, Nikkei 225 dropped 2.3%, Along with SoftBank Group, the tech-investing powerhouse, which is one of the largest constituents of the index, is shedding 4.1%.
Elsewhere in the region, South Korea’s Kospi Composite fell 1.7%, while the S&P/ASX 200 in Australia retreated 0.4%. Hong Kong’s Hang Seng index retreated 0.3% from early losses. Mainland sugar markets were closed for a holiday.
However, US stock futures rose, with futures gains in the S&P 500 and Nasdaq 100 indexes up 0.1% and 0.2%, respectively, suggesting that US markets may gain some ground in Tuesday’s trading session.
Sean Darby, global equity strategist at Jefferies, said investors had taken a very bullish stance towards the end of the third quarter, for example by investing on momentum, and this probably exacerbated the pullback.
“The positioning was very aggressive, and we’re probably not even going into a period of good macro release,” said Mr. Darby. “So I’m not sure what the market is going to gain as a ray of optimism in the short term.”
Concerns about Chinese property companies engulfed financial tensions at China Evergrande Group in recent weeks,
That was rekindled by smaller rival Fantasia Group Holdings, which said late Monday it had failed to repay certain mature dollar bonds. Fantasia stock was barred from trading, while the Lipo Select HK & Mainland Property Index fell more than 3%.
“Evergrande came and went. We were worried about it, then we decided it was all right, it was going to be a local event and it wasn’t organized. Now we have Fantasia,” Mr. Cornell told ING said. “That raises the possibility that maybe there is some contagion, maybe it could become a widespread phenomenon.”
However, Mr Cornell said the tension is limited to Chinese developers with junk credit ratings, not investment-grade-rated rivals or other sectors.