Asian stocks dip as Brent holds above $100, yields near 2023 peak

By Ankur Banerjee SINGAPORE, Sept 10 (Reuters) - Asian stocks slid on Thursday as the biggest wave of attacks on shipping in the widening war in the Middle East kept oil prices above $100 a barrel, leaving investors nervous ahead of U.S. inflation data that will influence near-term monetary policy. Benchmark 10-year U.S. Treasury yields held steady at 4.8407% after scaling their highest since 2023 in the previous session as the Treasury Department announced a $6 billion buyback of longer-dated bonds that disappointed some investors.

Brent crude futures eased to $101.11 per barrel, having broken through the psychological $100 mark on Wednesday for the first time since July as traders grappled with the prospect of inflationary pressure. Nick Twidale, chief market strategist at ATFX Global, said traders who had been holding off in hopes of a Middle East peace deal may now "hit the trigger as the realities of a longer conflict kick in." MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.7%. Japan's Nikkei eased 0.4% while South Korea's KOSPI dipped 0.2%.

European stock futures rose 0.25% ahead of an expected rate hike from the European Central Bank later in the day. Vasu Menon, managing director of investment strategy at OCBC, noted that "Markets are facing a cocktail of headwinds in September which has historically not been the best seasonal month for stock markets." There has also been an escalation in fighting between Saudi Arabia and the Houthis in Yemen, a second theatre of war that threatens global energy supplies from the Middle East as the six-month conflict shows no signs of easing. Higher oil prices and elevated bond yields have weighed on investor sentiment, setting the stage for a series of central bank meetings in the coming days.

The euro was little changed at $1.16322 ahead of the ECB decision. Market focus will be on policymaker comments to gauge further moves. The Fed and the Bank of Japan are due next week.

U.S. producer price and consumer price inflation reports are due later on Thursday and Friday, with analysts saying the data will play a key role in whether the Fed hikes rates at its September 15 to 16 meeting. Fed funds futures traders are pricing in about 60% odds of a rate increase next week. Prashant Newnaha, senior rates strategist at TD Securities, said, "The bond market is under pressure as oil prices reignite inflation fears.

Agricultural commodities are now breaking out and they are likely to lift food's contribution to CPI in coming months." The yen rally hinges on a hawkish BOJ next week. The Japanese yen was at 153.63 per U.S. dollar, having firmed 4% in September. The sharp rise has been driven by heightened expectations of faster BOJ rate hikes, traders exiting short positions in the Japanese currency, and early signs of a potential rush of repatriation of Japanese capital.

Board member Kazuyuki Masu warned of price risks that solidify the chance of a September hike. Matt Simpson, senior market analyst at StoneX, noted that Treasury Secretary Scott Bessent's buyback plan may face resistance from bond traders.

Source: Euronext Markets: Real-time Stock Market Data | live