Morning Report

Equity

Asian share markets played second fiddle to bonds on Wednesday as a spectacular fall in the price of oil fanned speculation the U.S. Federal Reserve might be done with tightening after its policy meeting later in the day.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.2 percent in hesitant early trade. Japan’s Nikkei eased 0.1 percent, while E-Mini futures for the S&P 500 inched up 0.17 percent.

Talk of a dovish turn helped Wall Street steady and the Dow ended Tuesday up 0.35 percent. The S&P 500 edged up 0.01 percent and the Nasdaq 0.45 percent.

Treasury yields

Stocks were left in the dust by bonds as 10-year Treasury yields hit their lowest since August at 2.8190 percent , near a major chart level at 2.80 percent.

Yields on two-year U.S. notes fell 4 basis points to a three-month trough of 2.656 percent, a massive turnaround from November’s 2.977 percent peak.

Japanese 10-year bond futures likewise started Wednesday at their highest since August 2016.

Currency

The steep drop in Treasury yields undermined one of the U.S. dollar’s major props and pulled Dollar index back to 97.000 , from a recent 97.711 top.
It fell to 112.46 yen , from a 113.70 high last week, while the euro nudged up to $1.1374 from a $1.1266 low.

Oil

Oil stole the show as a glut of supply saw U.S. crude sink 8 percent overnight, while Brent shed almost 6 percent. U.S. crude was last changing hands at $46.30 a barrel having hit its lowest since August 2017.

Brent’s 35 percent plunge since October is sending a disinflationary pulse through the world at a time when trade and economic activity are already cooling.

That has only added to pressure on the Fed to abandon its commitment to yet more hikes.

Source :Reuters

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