Stocks and emerging-market currencies decline in Asia amid concern that China may tighten Covid curbs after reported deaths, and as investors weigh the outlook for US rate hikes.
(Bloomberg) — Stocks and emerging-market currencies decline in Asia amid concern that China may tighten Covid curbs after reported deaths, and as investors weigh the outlook for US rate hikes.
Shares in Hong Kong led the drop, with the benchmark Hang Seng Index falling more than 3%.
The MSCI AC Asia Pacific index weakened to a one-week low, while US futures fell. The dollar rose against both Group-of-10 peers and emerging-market currencies.
China saw its first Covid-related death in almost six months on Saturday and another two were reported on Sunday.
A city near Beijing that was rumored to be a test case for the ending of virus restrictions has suspended schools, locked down universities and asked residents to stay at home for five days.
The latest cases of Covid infections and deaths in China are posing a challenge to the Chinese authorities, according to Steve Brice, chief investment officer for wealth management at Standard Chartered Bank.
“We’ve seen a very strong rally in China markets in recent times,” on the expectations of a relaxation of curbs, Brice said on Bloomberg Radio.
“So investors would be very kind of interested to see what the response is going to be.”
The Malaysian ringgit fell after an election delivered the nation’s first-ever hung parliament. South Korea’s Kospi dropped more than 1% amid weakness in tech and battery stocks as global funds take profit following a recent rebound in the gauge.
Treasuries rose across the curve on higher demand for havens.
“The China news on Covid is weighing on investor sentiment,” said Imre Speizer, a strategist at Westpac Banking Corp.
in Auckland. That’s “driving haven bids, with the dollar a prime beneficiary,” he said.
Looking beyond Asia, traders this week will also be looking to minutes of the most recent Federal Reserve policy meeting for more clues on the course of rate hikes.
Atlanta Fed President Raphael Bostic said he favors slowing the pace of interest rate increases, with no more than 1 percentage point more of hikes, to try to ensure the economy has a soft landing.
Boston Fed President Susan Collins reiterated her view that options are open for the size of the December interest-rate increase, including the possibility of a 75 basis-point move.
Kim Forrest, chief investment officer at Bokeh Capital Partners, said investors could look to the Treasury market for clues on Fed’s rate-hike trajectory.
The yield on the 10-year Treasury has fallen precipitously since the top in late October and shows “a softening inflationary environment,” she said on Bloomberg Television.
“The bond market is a little bit smarter about what the Fed needs to do and what it’s going to do.
It’s been telling us that the Fed probably won’t be able to get its rates up to 5% nor will it need to,” Forrest said.
Elsewhere, oil dropped as concerns about Chinese’s Covid curbs that could hurt demand and gold slid.
Key events this week:
- US Chicago Fed national activity index, Monday
- US Richmond Fed manufacturing index, Tuesday
- OECD releases Economic Outlook, Tuesday
- Fed’s Loretta Mester and James Bullard speak, Tuesday
- S&P Global PMIs: US, Euro area, UK, Wednesday
- US MBA mortgage applications, durable goods, initial jobless claims, University of Michigan sentiment, new home sales, Wednesday
- Minutes of the Federal Reserve’s Nov.
1-2 meeting, Wednesday
- ECB publishes account of its October policy meeting, Thursday
- US stock and bond markets are closed for the Thanksgiving holiday, Thursday
- US stock and bond markets close early, Friday
Some of the main moves in markets :
Stocks
- S&P 500 futures fell 0.4% as of 11:47 a.m.
in Tokyo. The S&P 500 rose 0.5% Friday
- Nasdaq 100 futures fell 0.4%. The Nasdaq 100 was little changed
- Japan’s Topix index was little changed
- South Korea’s Kospi index fell 1.3%
- Hong Kong’s Hang Seng Index fell 2.8%
- China’s Shanghai Composite Index fell 1.1%
- Australia’s S&P/ASX 200 Index fell 0.1%
- Euro Stoxx 50 futures fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index rose 0.3%
- The euro fell 0.3% to $1.0289
- The Japanese yen was little changed at 140.40 per dollar
- The offshore yuan fell 0.6% to 7.1663 per dollar
Cryptocurrencies
- Bitcoin fell 1.6% to $15,989.8
- Ether fell 1.8% to $1,121
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.79%
- Australia’s 10-year yield declined two basis points to 3.59%
Commodities
- West Texas Intermediate crude fell 1% to 79.30 a barrel
- Spot gold fell 0.4% to $1,744.16 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Ruth Carson.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
