Economic Tensions Impact Asian Markets as Investors Await Tech Giants' Earnings Reports

Asian stock markets are poised for modest gains after experiencing turbulence in the bond market and the S&P 500 index recording its lowest close since May. Meanwhile, oil prices have rebounded slightly following a decline on Monday, as uncertainty lingers over the progression of the Israel-Hamas conflict.

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Asian stock markets are poised for modest gains after experiencing turbulence in the bond market and the S&P 500 index recording its lowest close since May. Meanwhile, oil prices have rebounded slightly following a decline on Monday, as uncertainty lingers over the progression of the Israel-Hamas conflict.

In Australia, early trading witnessed marginal upswings, while Japanese shares are expected to see an increase in the near future. Conversely, in the United States, the S&P 500 index extended its fifth consecutive decline, marking its lengthiest downward trend this year. The Nasdaq 100, however, outperformed as investors awaited earnings reports from major tech companies like Microsoft Corp. and Nvidia Corp., both of which saw gains on Monday.

Attention in Asia is now gravitating towards China, as a series of arrests across various industries and an investigation into Foxconn Technology Group, a critical partner of Apple Inc., raise significant concerns. Additionally, market watchers are closely monitoring the Shanghai Composite Index, which is teetering on the edge of breaching crucial technical support levels.

On Monday, Treasury yields for the 10-year benchmark experienced a sharp drop after reaching 5%, reflecting the heightened volatility driven by expectations of sustained high-interest rates by the Federal Reserve and increased government bond sales to cover widening deficits. The yield surged by as much as 11 basis points to 5.02%, the highest since 2007, before retracing its gains and falling to as low as 4.83%.

Sam Stovall, Chief Investment Strategist at CFRA, remarked, “With the peak level for the 10-year yield still anyone’s guess, the US equity market should remain under pressure since breadth and relative strength readings have yet to hit extremes. As a result, one thing is certain: October will add to its reputation as the most volatile month of the year.”

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Prominent bond bears in the market assert that the recent historic sell-off in US Treasuries may have been too severe. Billionaire investor Bill Ackman, for instance, disclosed on social media that he reversed his bet against US government bonds due to escalating global risks. Bill Gross, co-founder of Pacific Investment Management Co., shared his strategy of purchasing short-dated interest-rate futures in anticipation of a potential recession by year-end.

JPMorgan Chase & Co.’s Marko Kolanovic contends that the full impact of the most aggressive monetary-tightening campaign by global central banks in decades is yet to materialize, presenting a persistent headwind for financial markets into the upcoming year.