Macro update
Asian shares retreat as AI spending concerns return: MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.4% to its lowest level since 23 October, with South Korea’s KOSPI losing as much as 4.1% and Taiwan’s market dropping 3.3%. Apple also fell 2.8% in after-hours trading after issuing a weaker gross margin forecast.
US election uncertainty puts Treasury yields in focus: Polls pointed to a Democratic victory in the House of Representatives, while the Senate race remained too close to call. However, Polymarket and Kalshi put the odds of Democratic control of the Senate at 77% and 76%, respectively. The US 10-year Treasury yield climbed 2.1 basis points to 4.913%.
Oil claws back ground as Iran tensions cloud peace hopes: Brent crude edged 0.5% higher to $105.25 a barrel, recovering some of Monday’s decline of more than 7%. US strikes on Iran’s Qeshm Island tempered optimism surrounding the prospect of a peace deal.
RBA raises rates but divided vote hints at a pause: The Reserve Bank of Australia increased its cash rate by 25 basis points to 4.85%, its highest level since December 2008. However, the narrow 6-3 vote suggested the tightening cycle may be nearing its end. The Australian dollar slipped 0.3% to $0.6978, while economists expected the Bank of England to raise rates to 4% this week.
Offshore yuan weakens after China tightens currency rules: The offshore yuan fell 0.36% to 6.671 per dollar, putting it on course for its biggest daily decline since May. The move followed the People’s Bank of China’s announcement that it would increase the foreign exchange reserve requirement ratio. The dollar index was marginally lower at 101.72.
Gold slips as expectations of Fed rate hike mount: Spot gold dropped 0.9% to $3,913.62 an ounce as rebounding oil prices fuelled inflation concerns. Traders were pricing in a 73% probability of a Federal Reserve rate increase in December, while silver fell 3% to $49.11.