SINGAPORE- Asian stocks inched lower and the dollar was firm on Thursday as looming central bank meetings in Europe and Japan and uncertainty over the supply of Russian gas kept traders on edge.
Wall Street indexes rallied overnight but even better-than-expected results from Tesla after hours couldn’t carry the positive mood into the Asia session.
Nasdaq 100 futures fell 0.3 percent and S&P 500 futures fell 0.2 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2 percent and Japan’s Nikkei fell 0.1 percent.
Market focus is on the resumption of gas flow along the biggest pipeline from Russia to Germany. If flow isn’t resumed, or is lacklustre, it will stoke worries about winter supplies.
Two sources familiar with the plans of Russia’s monopoly gas exporter, Gazprom, told Reuters on Tuesday that flows were likely to restart at pre-maintenance levels of 40 percent of capacity, which would probably be enough to calm markets for now.
The European Central Bank also meets on Thursday to begin Europe’s rate-hike cycle.
Markets are hedging bets on a hike of either 25 basis points or 50 bps, with the latter perhaps able to support a euro that has slipped below $1 this month.
“They need to be raising rates to deal with the way inflation is embedded,” said George Boubouras, head of research at K2 Asset Management in Melbourne.
“But the dilemma they’ve got is that the lack of energy security planning has regions of the European Union in a very difficult position…one can only assume that you’ve got minimal upside and large downside risks to the European economy.”
The euro wavered overnight and bought $1.0191 early in the Asia session. Traders also await details of an ECB plan to steady bond spreads in Europe by buying extra debt from periphery countries to keep a lid on yields.
The Bank of Japan ends a two-day meeting later on Thursday and although no policy change is expected, the outlook will be closely watched as will the reaction in currency and bond markets where some funds have bet on a shift. – Reuters
