Asia hesitates as oil hits 3-year highs


A man looks at an electrical panel showing the Nikkei Index outside a brokerage house in a business district in Tokyo, Japan on June 21, 2021. REUTERS / Kim Kyung-Hoon

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SYDNEY, Sept. 27 (Reuters) – Asian stocks got off to a cautious start on Monday, as a surge in oil prices to three-year highs could stoke inflation fears and worsen the recent hawkish turn by some major central banks.

Oil broke July peaks as disruptions to global production forced energy companies to remove large amounts of crude from inventories, while a shortage of natural gas in Europe pushed costs up across the continent .

Brent added another 62 cents on Monday to $ 78.71 a barrel, while U.S. crude rose 71 cents to $ 74.69.

“We expect this rally to continue, with our year-end forecast for Brent of $ 90 / bbl versus $ 80 / bbl previously,” Goldman Sachs analysts wrote in a client note.

“The current global oil supply and demand deficit is larger than expected, with the recovery in global demand from the Delta impacting even faster than our consensus forecast above.”

Such an increase could fuel speculation that global inflation will last longer than expected and hasten the end of super cheap money, favoring reflation trades in bank and energy stocks while squeezing bond prices.

The largest MSCI index for Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) was flat, after three consecutive weeks of losses.

Japan’s Nikkei (.N225) gained 0.4% in hopes of further fiscal stimulus once a new prime minister is chosen.

Nasdaq futures edged up 0.1% and S&P 500 futures edged up 0.3%.

The fate of China Evergrande Group (3333.HK) has remained a major unknown after the real estate giant missed a payment on offshore bonds last week, with another payment due this week.

Hong Kong stocks have come under the most pressure, although the Beijing government has added more liquidity to the financial system.

“We expect Chinese policymakers to allow debt deleveraging of the real estate sector with the aim of reducing moral hazard, but we are confident that they will actively manage the restructuring and effectively limit the financial fallout,” he said. JPMorgan analysts said in a note.

Eyes will also be on U.S. fiscal policy with the House of Representatives due to vote this week on a $ 1 trillion infrastructure bill, while a September 30 deadline for funding federal agencies could. force the second partial government shutdown in three years. Read more

The week is packed with speeches from the US Federal Reserve led by President Jerome Powell on Tuesday and Wednesday, with more than a dozen other events on the calendar.

The latest hawkish turn by the US central bank, and several others around the world, saw bond yields tilt before ending sharply higher last week.

The 10-year Treasury is at its highest since early July at 1.46% as reflation trade may pick up as the world braces for the end of super cheap silver.

The rebound in yields supported the US dollar, particularly against emerging market currencies that compete with Treasuries for global funds.

Against a basket of currencies, the dollar was firm at 93.292 and just off the 10 month August high at 93.734.

It even gained ground against the yen to hit a major chart barrier at 110.79. A break in this would bring the currency to a territory not visited since early July.

The euro was stable at $ 1.1719 as investors pondered the implications of a German government led by center-left Social Democrats after a narrow victory in Sunday’s election.

The Social Democrats have demanded a “clear mandate” to lead a government for the first time since 2005, ending 16 years of conservative rule under Angela Merkel.

“The likelihood of a political shift to the left suggests that Germany’s fiscal stance may become less of a drag on the economy over the next few years than is currently expected,” CBA analysts said in a note. “This would ultimately benefit the euro.”

The stronger dollar weighed on gold, which was pinned at $ 1,748 an ounce and just above a six-week low at $ 1,738.

Reporting by Wayne Cole; Editing by Christopher Cushing

Our Standards: The Thomson Reuters Trust Principles.

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