Asian Stocks Drift Amid 1995-Like Plunging US Treasuries

Asian stocks traded mixed on Wednesday after a weak earnings outlook weighed Wall Street amid falling treasuries with traders expecting a slower pace of Fed rate cuts.

Australia's S&P ASX 200 was 19 points, or 0.24%, higher at 8,225, while the Japanese Nikkei 225 was down 21 points, or 0.06%, at 38,384 as of 5:45 a.m. Futures contracts pointed at a positive start for stocks in Hong Kong and China.

China's stocks extended their gains on Tuesday after banks in the nation slashed key policy rates to revive the economy. The one-year loan prime rate was lowered to 3.10% from 3.35%, while the five-year LPR was reduced to 3.60% from 3.85%. 

Japanese stocks will see cautious trade this week, with the general election in the country scheduled for this weekend. Bloomberg News, quoting two polls, said support for Japanese Prime Minister Shigeru Ishiba is continuing to soften.

Meanwhile, Tokyo Metro Co., Japan's largest initial public offering since 2018 will debut on their stock exchanges.

Elsewhere, US treasuries were in free fall and plunged the most since 1995, when Alan Greenspan, the erstwhile Federal Reserve chair, started cutting interest rates to engineer a soft landing. Two-year yields in the US have climbed 34 basis points since the Fed reduced rates on Sept. 18.

This comes as traders have been trimming the prospects of a larger rate cut in the next Fed meeting. According to Bloomberg, since the end of last week, traders have cut the extent of expected Fed cuts through September 2025 by more than 10 basis points.

The stocks in the region ended down with the S&P closing lower for the second day straight, the first time in six weeks. The S&P 500 and Dow Jones Industrial Average slipped 0.05% and 0.02%, respectively, while the Nasdaq Composite advanced 0.18%.

In major moves, coffee chain Starbucks tumbled as it lowered guidance for 2025 after same-store sales declined for a third straight quarter. McDonald’s shares fell after its Quarter Pounders were linked to an E. coli outbreak in the US.

Crude oil prices remained mixed after the US signalled a rise in nationwide crude inventories. Tensions also mount in West Asia as traders expect Israel to retaliate against Iran for a missile strike earlier this month.

Brent crude was trading 0.41% lower at $75.73 a barrel as of 6:00 a.m. IST. West Texas Intermediate was up 2.17% at $72.09.