Asian stocks dropped for a fourth day as investors fretted about the prospect of US interest-rate hikes. Oil held above $50 a barrel amid uncertainty over Russia’s willingness to join Opec efforts to stabilize the market, while the pound rallied.
The MSCI Asia Pacific Index retreated to a three-week low. European and US index futures were little changed. Sterling rebounded 1.3 percent against the greenback after Prime Minister Theresa May accepted that Parliament should be allowed to vote on her plan for pulling the UK out of the European Union. The Bloomberg Dollar Spot Index slipped from its highest level since July as the Aussie strengthened.
Investors will scrutinize minutes from the Federal Reserve’s latest decision due Wednesday, with odds of a US rate increase by year-end climbing to 67 percent amid speculation the recent surge in oil prices will fuel inflation. Alcoa Inc. has brought the health of corporate America into focus after disappointing results. May’s decision to give lawmakers a say over Brexit is calming investors after they dumped the pound on concern she was taking a hardline approach to the negotiations.
“Stock markets are becoming nervous about the prospect of rising interest rates against a background of moderate profit growth and relatively high valuations,” Ric Spooner, chief market analyst in Sydney at CMC Markets, said in an e-mail. “Given how critical the interest-rate outlook is at the moment, markets will be focused on the degree of support for a rate hike this year revealed in the Fed minutes.”
Stocks
Futures on the Euro Stoxx 50 Index rose less than 0.1 percent as of 7:08 a.m. London time, while S&P 500 Index contracts added 0.1 percent.
The MSCI Asia Pacific Index dropped 0.6 percent, with raw energy producers and property stocks driving declines. Hong Kong’s Hang Seng Index declined 1.1 percent in a third day of losses as Bank of China Ltd. and Bank of Communications Co. sank more than 2.5 percent. In Japan, the Topix lost 1.1 percent.
Thailand’s SET Index tumbled 2.6 percent as it extended losses since Sunday’s announcement from the palace that the king’s condition remains unstable.
“Investors will focus on corporate earnings and the outlook provided by companies over the next six weeks as the Fed also prepares the market for what looks to be a likely interest-rate hike in December,” James Woods, a global investment analyst in Sydney at Rivkin Securities, said in an e-mail. Coupled with the looming US presidential election and Brexit concerns, “all of this provides multiple factors that have the ability to increase volatility over the coming months,” he said.
The pound climbed to $1.2273 from near a three-decade low. Parliament will debate on Wednesday a motion from the opposition Labor Party calling for a “full and transparent debate on the government’s plan for leaving the EU” and for lawmakers to be able to “properly scrutinize that plan” before May begins formal talks. In response, May tabled an amendment that effectively accepted the motion, adding that there shouldn’t be an attempt to block Brexit or “undermine the negotiating position of the government.”