Asian stocks and US equity futures extended declines following another day of losses for US shares and surging Treasury yields that underscore expectations for tighter monetary policy and a slowing global economy.
(Bloomberg) — Asian stocks and US equity futures extended declines following another day of losses for US shares and surging Treasury yields that underscore expectations for tighter monetary policy and a slowing global economy.
The MSCI Asia Pacific Index posted deeper losses on Friday and was headed for a sixth weekly decline, the longest streak since May. Equities fell in Hong Kong, Australia and South Korea after the S&P 500 Index closed at the lowest level since June.
Goldman Sachs Group Inc. slashed its year-end target for the S&P 500 to 3,600 from 4,300, arguing that a dramatic shift in the outlook for interest rates moving higher will weigh on valuations for US equities.
A dollar gauge held near a record high after a day of dramatic moves in currency markets that saw Japan intervene to prop up the ailing yen for the first time since 1998. The yen strengthened for a second day on Friday as traders brace for more action.
The offshore yuan weakened in the face of efforts to slow its depreciation, with the People’s Bank of China setting the daily reference rate stronger than expected for a 22nd day.
The 10-year Treasury yield was steady at around 3.7%, its highest in a decade. Yields in Asia pushed higher, led by a jump of more than 20 basis points in Australia as trading resumed there after a holiday.
There is no trading of cash Treasuries in Asian hours with markets closed in Japan for Autumnal Equinox Day.
Japan’s intervention hasn’t addressed the underlying cause of yen weakness — the yawning gap between Japan’s ultra-loose monetary policy and rising rates in other countries — leaving the currency vulnerable.
“There is value in slowing the decline of yen. It gives companies and people more time to react in more time to adjust contracts, processes, et cetera,” James Sullivan, head of Asia Pacific equity research at JPMorgan Chase & Co., said on Bloomberg Television. “Ultimately fundamentals will determine the value of the yen and the fundamentals are significant in rising rate differentials.”
Rate hikes in the UK, Switzerland and Norway, along with increases Thursday in Asia in the Philippines, Indonesia and Taiwan, damped market sentiment.
The Federal Reserve has given its clearest signal yet that it’s willing to tolerate a recession as the necessary trade-off for regaining control of inflation, with officials forecasting a further 1.25 percentage points of tightening before year-end.
Elsewhere in markets, gold edged toward a two-year low and Bitcoin pushed higher, extending gains to a second day, while remaining below $20,000. Oil slid as it headed toward a fourth weekly loss.
The energy market faces a very volatile last quarter of the year, Amrita Sen, co-founder and research director of Energy Aspects Ltd. said on Bloomberg Television. “It’s just too many different and contradictory factors driving prices right now,” she said, citing demand concerns from recessionary fears and supply constraints relating to Iran and Russia, as well as a lack of spare capacity from OPEC.
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Here are some of the main moves in markets:
Stocks
- S&P 500 futures lost 0.1% as of 7:05 a.m. in London. The S&P 500 fell 0.8%
- Nasdaq 100 futures dropped 0.2%. The Nasdaq 100 dropped 1.2%
- Hong Kong’s Hang Seng Index fell 0.7%
- China’s Shanghai Composite Index slipped 0.6%
- South Korea’s Kospi index tumbled 1.8%
- Australia’s S&P/ASX 200 Index retreated 1.9%
- Euro Stoxx 50 futures were up 0.1%
Currencies
- The Bloomberg Dollar Spot Index was up 0.5%
- The euro was down 0.1% to $0.9835
- The Japanese yen strengthened 0.2% at 142.13 per dollar
- The offshore yuan weakened 0.2% to 7.0985 versus the dollar
Bonds
- The yield on 10-year Treasuries was at 3.72%
- Australia’s 10-year yield jumped more than 25 basis points to 3.92%
Commodities
- West Texas Intermediate crude fell 0.2% to $83.35 a barrel
- Gold was up 0.1% to $1,673.10 an ounce
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