Stocks slumped in Asia and bond yields spiked higher amid concern that strong inflation and hawkish monetary policy will further slow the global economy.
(Bloomberg) — Stocks slumped in Asia and bond yields spiked higher amid concern that strong inflation and hawkish monetary policy will further slow the global economy.
Shares dropped in Japan, Australia and China, with Hong Kong’s equity benchmark headed for the lowest close since 2009.
Fears over slowing growth and rising Covid cases in China are adding to worries of investors amid the twice-a-decade party congress in Beijing. The offshore yuan traded around a fresh record low while an index of US-listed Chinese companies slumped more than 7% on Wednesday to the lowest in nine years.
Meanwhile in Japan, the 10-year yield again pushed above the 0.25% upper limit of the central bank’s target range, triggering it to announce unscheduled bond purchases to rein it back in.
Adding to the challenge for policy makers, the yen traded at levels last seen in 1990 and remained within a whisker of the key mark of 150 versus the greenback. This has traders on guard for potential government intervention to shore up the currency.
Government bond yields jumped more than 10 basis points in Australia and New Zealand, as US Treasury yields held near recent highs. The policy-sensitive two-year Treasury yield was near the highest since 2007.
This in turn was supporting the dollar, which was higher against its major counterparts and emerging-market currencies in Asia.
The Philippine peso dropped to a record low against the greenback while in South Korea credit strains prompted authorities to revive a $1.1 billion bond stabilization fund.
Federal Reserve Bank of St. Louis President James Bullard said he expected the central bank to end its ‘’front-loading” of aggressive interest-rate hikes by early next year and shift to keeping policy sufficiently restrictive with small adjustments as inflation cools.
The Fed is expected to raise interest rates by 75 basis points at its Nov. 1-2 meeting — its fourth straight increase of that size — as central bankers seek to cool the hottest inflation in four decades.
US equity futures fell in Asia after stocks on Wednesday halted a back-to-back rally, making any calls for a bottom look elusive. Not even bright earnings spots like Netflix Inc. and United Airlines Holdings Inc. were able to enthuse investors about more gains in the S&P 500. A late day rout in Tesla Inc. on disappointing sales could further weigh on sentiment.
“As we look at third-quarter results, we think there are going to be more misses than the market is currently expecting,” Ellen Hazen, chief market strategist at F.L.Putnam Investment Management, said on Bloomberg Radio. “If you look at GDP for this year, it keeps getting revised downward and it’s really hard for companies to keep growing their earnings in the face of that.”
Elsewhere in markets, oil held gains as the market shrugged off measures from US President Joe Biden to tame rising energy prices that have fueled inflation. Gold dipped to hold at a three-week low.
Key events this week:
- US existing home sales, initial jobless claims, Conference Board leading index, Thursday
- Euro area consumer confidence, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 fell 0.6% as of 12:17 p.m. Tokyo time. The S&P 500 fell 0.7% Wednesday
- Nasdaq 100 futures fell 1%. The Nasdaq 100 fell 0.4%
- Japan’s Topix index fell 0.6%
- The Hang Seng Index fell 2.3%
- The Shanghai Composite Index fell 0.4%
- Australia’s S&P/ASX 200 Index fell 1.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.1% to $0.9760
- The Japanese yen was little changed at 149.92 per dollar
- The offshore yuan was little changed at 7.2620 per dollar
Cryptocurrencies
- Bitcoin fell 0.8% to $19,039
- Ether fell 1.1% to $1,280.82
Bonds
- The yield on 10-year Treasuries advanced one basis point to 4.14%
- Australia’s 10-year yield climbed 13 basis points to 4.08%
Commodities
- West Texas Intermediate crude rose 0.6% to $86.08 a barrel
- Spot gold fell 0.2% to $1,625.84 an ounce
–With assistance from Tassia Sipahutar.
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