(Bloomberg) – Asian stocks fell after US stocks fell and Treasury yields settled near multi-year highs as investors positioned themselves on a hawkish Federal Reserve interest rate hike.
Shares in Japan, Hong Kong and Australia fell after the S&P 500 fell more than 10% below its August high, marking the peak of its rally from this year’s low. US contracts were volatile and European stock futures fell.
Two-year Treasury yields are down from nearly 4% as traders weigh the risks that monetary tightening will push the economy into recession. The Bank of Japan announced a non-scheduled bond purchase as it seeks to limit upward pressure on yields before making a policy decision later this week.
The dollar scale traded near a record level amid market jitters while Bitcoin hovers around the $19,000 level. The offshore yuan fell to its lowest level against the dollar since mid-2020, even after the People’s Bank of China set a stronger-than-expected daily reference rate for the 20th day.
Federal Reserve officials are about to put the numbers on the “pain” they have warned of when the central bank releases new economic forecasts on Wednesday. They are expected to rise by 75 basis points again, according to the vast majority of analysts polled by Bloomberg. Only two projects move 100 basis points.
said Fiona Cincotta, chief financial markets analyst at City Index. “That’s what will drive the markets, not tomorrow’s rate hike, but what the Fed plans to do next.”
Nouriel Roubini, who correctly predicted the 2008 financial crisis, sees a “long and ugly” recession occurring at the end of 2022 and could continue throughout 2023 and a sharp correction in the S&P 500.” Even in a simple vanilla recession, the S&P 500 BP 500 companies could fall by 30%, said Roubini Macro Associates, president of the 500 companies, in a “real hard landing” that he expects, it could fall by 40%.
However, some professional speculators still refuse to succumb to the harsh stock market prone to volatility – consolidating bullish and bearish positions at the fastest rate in five years. With the S&P 500 down last week, hedge funds snapped up individual stocks while betting against the broad market with products like exchange-traded funds, data from major brokerage Goldman Sachs Group Inc.
Christopher Smart, chief global strategist for Barings LLC, said equity markets faced further pressure from weak valuations while some corners of credit markets remained attractive. “The degree of investment and the high return are where my colleagues find a lot of opportunity,” he said on Bloomberg TV. “The fundamentals of the US economy are very strong. They need to weaken a little bit to calm some of that inflation pressures, but you can find a lot of companies that have strong balance sheets.”
Elsewhere in the markets, oil fluctuated around $84 a barrel as it headed for its first quarterly loss in more than two years amid concerns about energy demand. Gold was flat near a two-year low.
This week’s main events:
- The Federal Reserve’s decision, followed by a press conference with President Jerome Powell, Wednesday
- CEOs of major banks testify before the US Congress in two sessions on Wednesday and Thursday
- US Existing Home Sales, Wednesday
- Crude oil inventory report from the Energy Information Administration, Wednesday
- Bank of Japan monetary policy decision, Thursday
- Bank of England interest rate decision, Thursday
- American Conference Board Leading Indicator, Initial Jobless Claims, Thursday
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Some of the main movements in the markets:
- S&P 500 futures were up 0.2% as of 1.01 pm in Tokyo. The S&P 500 is down 1.1%.
- Nasdaq 100 futures rose 0.2%. The Nasdaq 100 index fell 0.9%.
- Japan’s Topix fell 1.1%
- Australia’s S&P/ASX 200 Index is down 1.4%
- South Korea’s Kospi Index fell 0.8%
- The Hang Seng Index is down 1.5%.
- Euro Stoxx 50 futures fell 0.2%
- Bloomberg spot dollar index up 0.1%
- The euro settled at $0.9966
- The Japanese yen was at 143.82 to the dollar
- The offshore yuan fell 0.3 to 7.0498 against the dollar
- The yield on the 10-year Treasury was stable at 3.56%.
- The yield on Australian 10-year government bonds rose nine basis points to 3.72%.
- West Texas Intermediate crude fell 0.5% to $84.01 a barrel
- Gold futures were trading at $1,663.85 an ounce
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