Stocks extended declines in Asia as Treasury yields held at the highest level since the global financial crisis and investors weighed risks to Chinese markets.
(Bloomberg) — Stocks extended declines in Asia as Treasury yields held at the highest level since the global financial crisis and investors weighed risks to Chinese markets.
A gauge of Asian equities headed for a second week of declines, with chip giant Taiwan Semiconductor Manufacturing Co. and major Australian banks among the biggest drags. European and US stock futures dropped amid wariness around economic challenges.
Traders are being challenged by mixed signs from the Chinese government and the twice-a-decade party congress. A report that officials were considering relaxing quarantine rules was positive for sentiment while negative signals came from news that the Biden administration planned additional export controls on China’s access to powerful computing technologies.
The dollar rose amid elevated Treasury yields. The yield on the 10-year US note went above 4.25% for the first time since 2008 as traders started to price in a higher peak Federal Reserve policy rate.
The yen remained weaker than the closely-watched 150 per dollar level. Ten-year yen swap rates broke above 0.6% to a more than eight-year high while Japan’s benchmark 10-year bond yield was at the top of the central bank’s 0.25% trading band, underscoring global pressure on rates.
The pound remained under duress as the UK looks for a new leader to succeed Liz Truss.
“The Bank of England was probably on the hook in terms of having to hike rates aggressively to counter some of the inflationary impulses from tax cuts and fiscal spending,” Mitul Kotecha, chief emerging markets Asia and Europe strategist at TD Securities, said on Bloomberg Television. While some of that pressure has gone away, it doesn’t mean the BOE can stop hiking, he said.
Hawkish remarks from Fed officials and swaps pricing in a 5% peak policy rate in 2023 should continue to support the greenback against its major peers and emerging-market currencies.
Shares of some Chinese chip-related stocks fell as the US was said to be considering new export controls that would limit China’s access to powerful computing technologies.
Meanwhile, US equity volatility is showing no signs of abating ahead of Friday’s $2 trillion options expiration and another raft of corporate earnings.
Elsewhere, oil edged higher after a rocky week as concerns over a global economic slowdown continue to weigh on the market. Iron ore was on track for its longest stretch of weekly declines since 2016 amid mounting worries over the global outlook for steel demand.
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.3% as of 7:24 a.m. London. The S&P 500 fell 0.8% on Thursday
- Nasdaq 100 futures were down 0.6%. The Nasdaq 100 fell 0.5%
- Japan’s Topix index dropped 0.7%
- South Korea’s Kospi index lost 0.2%
- Hong Kong’s Hang Seng Index fell 0.7%
- China’s Shanghai Composite Index fell 0.2%
- Australia’s S&P/ASX 200 Index lost 0.8%
- Euro Stoxx 50 futures fell 0.9%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.1% to $0.9773
- The Japanese yen fell 0.1% 150.42 per dollar
- The offshore yuan fell 0.2% to 7.2652 per dollar
- The British pound weakened 0.5% to $1.1181
Cryptocurrencies
- Bitcoin rose 0.2% to $19,063.00
- Ether rose 0.6% to $1,290.22
Bonds
- The yield on 10-year Treasuries advanced three basis points to 4.26%
- Australia’s 10-year yield advanced 14 basis points to 4.20%
Commodities
- Spot gold fell 0.4% to $1,620.91 an ounce
–With assistance from Masaki Kondo and Naomi Tajitsu.
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©2022 Bloomberg L.P.
