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Asia stocks decline ahead of central bank meetings

Asia stocks lower

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.2%, having reached a one-year low last week

Asian shares tumbled on Monday amid concerns of a wider conflict in the Middle-East ahead of central bank meetings in the US, Britain and Japan, the latter of which might see a policy tightening.

The earnings season also continues with Apple, Airbnb, McDonalds, Moderna and Eli Lilly & Co among the many reporting this week. Results so far have been underwhelming, contributing to the S&P 500’s pull back into correction territory at 4,117.

The price action is not good as SPX could not defend a key 4,200 level; risk is it heads to the 200-week moving average of 3,941 before a trading rally, according to BoA analysts.

Early on Monday, S&P 500 futures rose 0.3% to 4,152, after Friday’s sharp decline, while Nasdaq futures gained 0.5%.

Risk appetite was dulled by developments in the Middle-East.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.2%, having reached a one-year low last week.

Japan’s Nikkei dropped 1.0% amid speculation the Bank Of Japan might tweak its yield curve control policy after its two-day policy meeting ends on Tuesday.

Many experts expect the central bank will raise its inflation forecast to 2.0%, but are not sure whether it will finally abandon yield curve control in the face of market pressure on bonds.

Remaining uncertainty about the wage outlook, along with stresses in global bond markets could prompt the BOJ to err on the side of caution, making our view that yield curve control will be scrapped a very close call, said analysts at Barclays.

The Bank Of Japan could still choose to revise policy but less drastically, perhaps by increasing the ceiling for 10-year yields as it did in July, they added.

Abandoning yield curve control altogether would likely see Japanese bond yields increase and add to pressure on global markets already bruised by a vicious sell-off in U.S. Treasuries.

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